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Item 9A. Controls and Procedures

2023-03-30 compared with 2022-03-29 · 410 added, 984 removed, 475 unchanged (75% of the section changed)

Controls and Procedures.

Limitations on Effectiveness of Controls and Procedures

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Evaluation of Disclosure Controls and Procedures

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We maintain “disclosure controls and procedures,”

as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange Act) that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (2) accumulated and communicated to our management, including our principal executive and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

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Based on the evaluation of our disclosure controls and procedures as of December 31, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

In preparation of our financial statements to meet the requirements of our IPO, we determined that material weaknesses in our internal control over financial reporting existed during fiscal 2020 and remain unremediated as of December 31, 2021.

A material weakness is a deficiency or combination of deficiencies in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of a company’s annual and interim financial statements will not be detected or prevented on a timely basis.

The material weaknesses we identified are related to;

(1) the fact that we did not have sufficient finance and accounting staff with U.S.

GAAP technical and accounting expertise to evaluate and account for significant transactions and oversee our third-party consultants.

As a result we did not design and maintain formal accounting policies, processes and controls to analyze, account for and disclose certain complex transactions, which led to inappropriate accounting conclusions associated with stock compensation expenses.

(2) the fact that we lacked proper monitoring entity level controls and segregation of duties due to our small accounting staff.

Remediation Activities

Management has been actively engaged in remediating the above described material weaknesses.

Management's Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting.

Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act as a process designed by, or under the supervision of, a company’s principal executive officer and principal financial officer, or persons performing similar functions, and effected by a company’s board of directors, management, and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of a company’s assets;

provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that a company’s receipts and expenditures are being made only in accordance with authorizations of the company’s management and directors;

provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.

Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate.

Under the supervision of and with the participation of our principal executive officer and principal financial

officer, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2022 based on the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control—Integrated Framework (2013).

Based on this assessment, management concluded that our internal control over financial reporting was effective as of December 31, 2022.

This Annual Report on Form 10-K does not include an attestation report of our independent registered public accounting firm on internal control over financial reporting due to an exemption established by the JOBS Act for “emerging growth companies.”

Remediation of Previously Reported Material Weaknesses

The material weaknesses related to our finance and accounting staff and segregation of duties that were previously reported in Item 9A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and 2020 and are described in "Risk factors" section of the Annual Report on Form 10-K were remediated during our fiscal year ended December 31, 2022, and we determined that we maintained effective internal controls over our financial reporting as of December 31, 2022.

Management took significant steps to remediate the control deficiencies that led to the material weaknesses and has been actively engaged in remediating the previously identified material weaknesses.

The following remedial actions have been taken during the year ended December 31, 2022:

(1) hiring an experienced Chief Financial Officer with experience serving as acting chief financial officer of a public company and serving as an audit partner at a major accounting firm and a Controller with experience working at a public company and as a manager at a major public accounting firm;

(2) strengthening supervisory reviews by our financial management, and

(3) expanding our accounting and finance team to add additional qualified accounting and finance resources, which may include augmenting our finance team with third-party consultants that possess the required expertise to assist management with their review.

In September 2022, we hired a new Chief Financial Officer with prior experience serving as a chief financial and accounting officer of several public companies who also served ten years in a major public accounting firm.

We hired a Controller in November 2021 with experience working at a public company and as a manager at a major public accounting firm.

Each of the above personnel have technical accounting expertise and experience with the internal control, compliance and financial reporting requirements of companies subject to PCAOB standards.

We strengthened supervisory reviews by our financial management.

We expanded our accounting and finance team to add additional qualified accounting and finance resources, including augmenting our finance team with third-party consultants that possess the required expertise to assist management with their review, as necessary.

We implemented Oracle NetSuite as our Enterprise Resource Planning (ERP) solution in the third quarter of 2022, which among other features, has automated segregation of duties functionality relating to the ability to create and post journal entries to our general ledger.

We implemented a Software-as-a-Service (SAAS) solution to assist with the review and approval of account reconciliations and other financial close workflows.

We enhanced business process narratives and identification of key controls in our SOX framework.

We performed internal interim and year-end SOX assessments that did not result in the identification of any material weaknesses related to the design or operating effectiveness of identified key controls.

We believe the above actions were effective and concluded that the material weaknesses described above were remediated as of December 31, 2022.

The process of implementing an effective financial reporting system is a continuous effort that requires us to anticipate and react to changes in our business and the economic and regulatory environments and to expend significant resources to maintain a financial reporting system that is adequate to satisfy our reporting obligations.

As we continue to evaluate and take actions to improve our internal control over financial reporting, we may take additional actions to address control deficiencies.

This may include the hiring of additional qualified personnel and implementation of a new accounting system.

While progress has been made to enhance our internal control over financial reporting, we are still in the process of implementing these processes, procedures and controls.

Additional time is required to complete implementation and to assess and ensure the sustainability of these procedures.

We believe the above actions will be effective in remediating the material weaknesses described above and we will continue to devote significant time and attention to these remedial efforts.

However, the material weaknesses cannot be considered remediated until the applicable remedial controls operate for a sufficient period of time and management has concluded that these controls are operating effectively.

Management’s Report on Internal Control Over Financial Reporting

This Annual Report does not include a report of management’s assessment regarding internal control over financial reporting or an attestation report of our independent registered public accounting firm due to a transition period established by rules of the SEC for newly public companies.

Changes in Internal Control Over Financial Reporting

The items described in “Remediation Activities”

above are considered a change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act) during the fourth quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Except for the remedial actions described above, there was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the three months ended December 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting

Other Information.

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Directors, Executive Officers and Corporate Governance.

The following table sets forth information regarding our executive officers and directors as of the date of this Annual Report on Form 10-K.

Executive Officers

Paul Peter Tak, M.D., Ph.D., FMedSci

President, Chief Executive Officer, and Director

Francesca Barone, M.D., Ph.D.

Chief Scienctific Officer

Chief Business Officer

Chief Financial Officer

Susan Stewart, J.D.

Chief Regulatory Officer

Non-employee Directors

Chairman of the Board of Directors

Smith, Ph.D., FRS, CBE (2)

Chris Martell (1) (2)

Diem Nguyen, Ph.D., M.B.A.

Benz, Jr., M.D.

Estuardo Aguilar-Cordova, M.D., inf., Ph.D.

Gandhi, M.D., D.Phil (1)(3)

Udi Meirav, Ph.D.

(1) Member of audit committee

(2) Member of compensation committee

(3) Member of nominating and corporate governance committee

Executive officers

Paul Peter Tak, M.D., Ph.D., FMedSci , has served as President and Chief Executive Officer of Candel since September 2020.

He received his medical degree cum laude from the Free University in Amsterdam and was trained as an internist, rheumatologist and immunologist at Leiden University Medical Center, where he also received his Ph.D.

He has been Clinical Associate Professor of Medicine at the University of California San Diego.

Next, he served as Professor of Medicine and founding Chair of the Department of Clinical Immunology and Rheumatology at the Academic Medical Centre/University of Amsterdam (AMC).

During this time, he founded Arthrogen b.v., a biotech company focused on gene therapy.

He has published extensively in peer-reviewed journals and received numerous awards.

He has been elected Fellow of the Academy of Medical Sciences (U.K.).

At GlaxoSmithKline he served as Senior Vice President, Chief Immunology Officer, and Global Development Leader from 2011 to 2018.

He oversaw the creation of a portfolio of new medicines for immune-mediated inflammatory diseases, cancer, infectious disease and pain, including anti-OSM antibody, anti-LAG3 antibody, ESM-BET inhibitor, RIP1 kinase inhibitor, anti-GM-CSF antibody, anti-CCL17 antibody, Benlysta sc, gepotidacin, molibresib (BET inhibitor), belantamab mafodotin (anti-BCMA antibody-drug conjugate), and NY-ESO1 SPEAR T cell therapy.

He was the Chair of the Scientific Review Board, the governing body accountable for the scientific assessment of GSK’s R&D portfolio.

From 2018 to 2020, Dr.

Tak served as venture partner at Flagship Pioneering and also as President and CEO of Kintai Therapeutics, a start-up focused on enteric signaling networks, where he oversaw the creation of a portfolio of proprietary small molecules called precision enteric medicines for the treatment of obesity, neurological disease, and cancer.

In addition, he has served as President and CEO of Tempero Pharmaceuticals, Board Member of Galvani Bioelectronics, ViiV Healthcare, Sitryx Therapeutics (co-founder), Omega Therapeutics, Levicept, and Citryll.

Francesca Barone, M.D., Ph.D., has been Candel's Chief Scientific Officer since February 2022 and previously served as our Vice President, Head of Research from November 2020 to February 2022.

She joined Candel in November 2020 as Head of experimental medicine and discovery, overseeing the implementation of biological measures of outcome and biomarker studies in the clinical pipeline, and directing the design of Candel novel discovery platform.

Before joining Candel, Dr.

Barone served as VP and Head of Experimental Medicine at Kintai Therapeutics, Inc, a Flagship Pioneering, Inc.

company, from May 2019 through its merger into Senda Biosciences, Inc.

in November 2021.

While serving in that position she was responsible both for preclinical development, leading the biology team while supporting the definition of the company clinical strategy in the areas of immune-oncology, metabolic disease and neuroinflammation.

Prior to moving to industry, Dr.

Barone served as Reader (Associate Professor) in Experimental Rheumatology at the University of Birmingham (UK).

During her tenure she also served as Academic Director of Business Engagement for the College of Medical and Dental Sciences and Director of the laboratories for Immuno-phenotyping in the Institute of Translational Medicine.

She has published extensively in peer-reviewed journals, was the recipient of two fellowship to support her research program and led efforts to establish collaborative alliances between

the University of Birmingham and world leader pharmacology industries.

She received her medical degree cum laude from the University of Rome, Sapienza and was trained in the same university as Rheumatologist.

She received her Ph.D.

at Kings College, London.

Nathan Caffo , has been Candel’s Chief Business Officer since September 2020.

From September 2018 to September 2020, he was CBO at ALX Oncology, an immuno-oncology company, where he played a central role in the company’s financing including series B and C and debt financings totaling $120 million, as well as the company’s $186 million initial public offering.

He was also responsible for all strategic partnering activities.

Prior to ALX Oncology, he was President and CEO of Presage Biosciences, an oncology company that developed the first intratumoral microdosing platform for evaluation of multiple oncology agents where he worked from April 2009 to August 2018.

While at Presage he led the company’s partnering strategy, resulting in over $30 million in upfront cash.

Caffo’s 26-year industry career has been focused on cancer therapeutics, personalized medicine, and applications of genomic technology.

Caffo also led drug in-licensing at Perlegen Sciences, a genomic medicine spin-off of Affymetrix.

Prior to that, he worked at Applied Biosystems (now Life Technologies) and its sister company Celera (now Quest Diagnostics) for 11 years in a number of technical and business roles, including managing the company’s genomics service business.

Caffo has a B.S.

in Microbiology from Pennsylvania State University.

John Canepa , has been Candel’s Chief Financial Officer since December 2020.

Canepa has over 40 years of experience in the life science industry as an audit partner with a large international public accounting firm, and as a financial executive with public and private life science companies.

Prior to joining Candel, he served as Senior Advisor, Acting CFO of Frequency Therapeutics from December 2018 until November 2020.

During this time, Frequency completed several public and private financings, including its initial public offering in October 2019, and dramatically expanded its operations.

Prior to joining Frequency, Mr.

Canepa served as CFO of Agilis Biotherapeutics from December 2017 to August 2018 and was instrumental in its sale to PTC Therapeutics in August 2018.

Prior to Agilis, he was COO and CFO of Asterand Bioscience from October 2012 to August 2017 and led its sale to a private equity group in 2017.

Canepa began his career at Arthur Andersen & Co.

and was with the firm for 23 years.

He was a partner in the Boston office technology practice and the worldwide leader of the firm’s life science practice.

Canepa received a B.A.

in Economics from Denison University and a Master’s Degree in Finance from Michigan State University.

John is a Trustee of Mount Auburn Hospital in Cambridge Massachusetts and is on the board of the Beth Israel Lahey Health network.

Susan Stewart, J.D.

, has served as Candel’s Chief Regulatory Officer since October 2020.

Stewart has worked for more than 28 years in biopharmaceutical regulatory affairs, with significant experience devising innovative strategies for novel therapeutics, overseeing regulatory submissions at various stages of product development and leading interactions with global health authorities.

As an independent consultant, she also serves as Chief Regulatory Officer at Kaleido Biosciences, and had served as senior vice president of regulatory affairs and quality at Kaleido Biosciences, senior vice president of regulatory affairs, quality, and compliance at Tokai Pharmaceuticals and vice president, regulatory affairs at Transmolecular.

She also spent 13 years at Genzyme Corporation in regulatory and compliance roles, including serving as vice president, regulatory affairs after beginning her career with Abbott Laboratories.

She received her J.D.

from Concord Law School at Purdue University Global, her LL.M.

from the Maurice A.

Deane School of Law at Hofstra University and her B.A.

from the University of Massachusetts.

She is a Fellow of the Regulatory Affairs Professionals Society (RAPS), a Director of the Board, and holds Regulatory Affairs Certifications (RAC) for both the United States and Europe.

Non-Employee Directors

Manning has served as a member of Candel's board of directors since November 2018.

Manning currently serves as the Chief Executive Officer of PBM Capital Group, LLC, or PBM Capital, a private equity investment firm in the business of investing in healthcare and life-science related companies, which he founded in 2010.

Manning is a member of the board of directors of Liquidia Corporation (NASDAQ:

LQDA) and Taysha Gene Therapies, Inc.

TSHA), and he currently serves as Chairman of the board of directors of Verrica Pharmaceuticals Inc.

VRCA) He previously served on the board of directors of Dova Pharmaceuticals, Inc., a biopharmaceutical company, from September 2016 to November 2019, and AveXis, Inc., a gene therapy company, from April 2014 to May 2018.

Manning received a B.S.

in microbiology from the University of Massachusetts.

We believe Mr.

Manning’s 30 years of managerial and operational experience in the healthcare industry and as an investor in healthcare related companies provides him with the appropriate set of skills to serve as a member of our board of directors.

Estuardo Aguilar-Cordova, M.D., Ph.D., has served as Candel's Founder and as Chief Scientific Officer from September 2020 to February 2022, and previously served as our Chief Executive Officer from 2002 until September 2020.

He has more than 30 years of experience in the fields of biotherapeutics, cancer research and drug development, including serving as principal or co-investigator in more than 25 clinical trials ranging from Phase I to Phase III.

Prior to starting Candel, Dr.

Aguilar-Cordova held academic positions for nearly two decades.

Most recently, he was deputy director of the Harvard Gene Therapy Initiative at Harvard Medical School in Boston and was a faculty member in Pediatrics, Hematology-Oncology at Baylor College of Medicine in Houston.

He has served on numerous national oversight committees, including roles as chairman and member of the NIH Recombinant Advisory Committee (RAC), as a

consultant to the FDA Biological Response Modifiers Advisory Committee (BRMAC), and as a member of the Vaccine and Related Products Advisory Committee (VRPAC).

Aguilar-Cordova has also held other appointments including president of the Latin American Gene Therapy Society.

Aguilar-Cordova has published more than 80 peer-reviewed scientific publications and book chapters, is on the editorial board of various professional journals and is an inventor on several patent applications.

Aguilar-Cordova has an undergraduate degree in Biology and Chemistry from California State University, Bakersfield, an M.D.

from the University del Valle de Guatemala and a Ph.D.

from the University of California, Davis.

Benz, Jr., M.D.

, has served as a member of Candel's board of directors since September 2017.

Benz is the President and CEO Emeritus of the Dana-Farber Cancer Institute and a member of the Dana-Farber Cancer Institute Board of Directors.

Benz is an expert in blood disorders and is board certified in both hematology and internal medicine.

He is an active clinical hematologist and a National Institutes of Health (NIH) funded researcher with a focus on the molecular basis and genetics around inherited blood disorders.

From October 2000 until his retirement in October 2016, Dr.

Benz served as President and CEO of Dana-Faber Cancer Institute and the Richard and Susan Smith Professor of Medicine and Professor of Genetics at Harvard Medical School.

Prior to his role at Dana-Farber, Dr.

Benz served as chairman for the Department of Medicine and Sir William Osler Professor of Medicine at Johns Hopkins University School of Medicine, as well as physician in chief at Johns Hopkins Hospital.

Benz has also served as President of the American Society of Hematology, the Association of American Cancer Institutes, the American Society for Clinical Investigation, the American Clinical and Climatological Society, and the Friends of the National Institute of Nursing Research.

Over the course of his career, Dr.

Benz has authored more than 300 articles, books, reviews and abstracts and has received numerous awards.

Benz serves on the board of directors of F-star Therapeutics, Inc.

FSTX) and Deciphera Pharmaceuticals, Inc.

DCPH), and also serves on the board of directors of Renovacor, Inc.

RCOR) and serves on our Research Advisory Board.

We believe Dr.

Benz’s experience in the field of hematology and blood disorders provides him with the appropriate set of skills to serve as a member of our board of directors.

Chris Martell has served as a member of Candel's board of directors since November 2018.

Chris Martell is the manager of GTAM1 2012 ADV LLC and an investor at Martell Capital.

Previously, Chris was a Partner at PBM Capital in 2018.

Prior to joining PBM Capital, Chris had an 18-year career at J.P.

Morgan where he was a managing director in the Healthcare Investment Banking and Mergers and Acquisitions groups.

He led the execution of a wide range of transactions including mergers and acquisitions, spin-offs and corporate separations, initial public offerings and equity and debt financings for Medical Device, Life Science Tool and Diagnostic, Pharmaceutical and Biotechnology companies.

Chris graduated from Yale University with a B.A.

in Ethics, Politics and Economics.

We believe Mr.

Martell’s broad financial and investment banking experience, financial and transactional expertise and acumen in mergers and acquisitions and complex financial transactions provides him with the appropriate set of skills to serve as a member of our board of directors.

Udi Meirav, Ph.D.

, has served as a member of Candel's board of directors since 2004.

Meirav is CEO of Calibre Biometrics, Inc., a company developing and manufacturing wearable devices for respiratory measurements and metabolic tracking.

He is also the President and Founder of Boston-based EnVerid, Inc., an energy-efficiency materials company, a role he has served in since 2010 and was previously the Chief Executive Officer of Luminus Devices, Inc., a manufacturer of high performance LEDs for solid state lighting.

Meirav has served on numerous boards of directors of companies involved in IT, life sciences, semiconductors and solid state lighting.

He has also worked with Stata Venture Partners, an early stage venture capital fund, and with Strategic Decisions Group, a premier consulting firm with focus on pharmaceuticals and biomedical technology.

Meirav has a Ph.D.

in Physics from the Massachusetts Institute of Technology and a Bachelor of Science degree in Mathematics and Physics from Tel Aviv University.

We believe Dr.

Meirav’s multidisciplinary background with executive experience in technology and finance provides him with the appropriate set of skills to serve as a member of our board of directors.

Diem Nguyen, Ph.D., MBA , has served as a member of Candel's board of directors since July 2021.

Nguyen is the Chief Executive Officer and member of the board of directors of Xalud Therapeutics, a private biotechnology company, which is majority-owned by PBM Capital.

Previously, Dr.

Nguyen was the Executive Vice President of PPD, a leading global clinical research organization providing drug development services, a position she held from April 2018 to April 2020.

Since 2008, Dr.

Nguyen has held various leadership roles at Pfizer Inc., last serving as Global President, Americas of Pfizer Essential Health from January 2017 to March 2018.

Nguyen is a director at Verrica Pharmaceuticals Inc.

VRCA) and Children’s Hospital of Philadelphia.

She received a B.A.

in Chemistry with Specialization in Biochemistry and a Ph.D.

in Biochemistry and Molecular Genetics from the University of Virginia, and an MBA in General Management from the University of Virginia’s Darden Graduate School of Business Administration.

We believe that Dr.

Nguyen’s managerial, commercial and medical experience in the pharmaceutical industry provides her with the appropriate set of skills to serve as a member of our board of directors.

Smith, Ph.D., FRS, CBE , has served as a member of Candel's board of directors since October 2015.

Smith is the former Senior Vice President (1989-2011) and Chief Scientific Officer of Genzyme Corporation, Cambridge, MA, a position he held from 1997 to 2011.

Prior to its acquisition by Genzyme in 1989, Dr.

Smith was the Vice President and

Scientific Director of Integrated Genetics, a Massachusetts start-up biotechnology company.

Smith sits on the Scientific Advisory Board of Pharnext, a start-up genomics company in Paris, France, and he is on the Board of Directors of Arecor, a start-up biotechnology company in Cambridge UK.

From 2014 to 2020, he was chairman of the Board of Cambridge in America, the representative body of the University and Colleges of Cambridge in North America, and from 2016 -2019, he was chairman of Native Plant Trust, the first plant conservation organization in the United States.

Smith has published extensively on the genetic code and protein synthesis, tumour virology, cell biology and cystic fibrosis.

He holds a B.A.

from Christ’s College, Cambridge UK and a Ph.D.

from the Laboratory of Molecular Biology, Cambridge, England.

He is a fellow of the Royal Society of London and of Christ’s College.

We believe Dr.

Smith’s executive experience provides him with the appropriate set of skills to serve as a member of our board of directors.

Gandhi, M.D., D.Phil.

has served as a member of Candel's board of directors since May 2020.

Gandhi is a Director at Northpond Ventures, LLC (Northpond Ventures), a global science, medical and technology-focused venture capital firm, where he leads the firm’s work in biotechnologies.

Previously, Dr.

Gandhi was a Principal at the Longwood Fund from 2018 to 2020, where he created and invested in life sciences companies, including Pyxis Oncology, a cancer immunotherapy company focused on novel modulators of the tumor microenvironment, which he co-founded and served as President.

He was an attending hospitalist at Massachusetts General Hospital from 2018 to 2019, where he also did his residency in internal medicine from 2015 to 2018.

He serves on the boards of directors of two other public companies, DICE Therapeutics (NASDAQ:

DICE) and Vigil Neuroscience (NASDAQ:

VIGL), as well as the boards of various private companies, including CAMP4 Therapeutics, Garuda Therapeutics, Kyverna Therapeutics, Mestag Therapeutics, Parthenon Therapeutics, StrideBio, Teckro, and Totus Medicines.

He holds an M.D.

from Harvard Medical School;

from Harvard Business School, where he was a Baker Scholar;

in medical oncology from the University of Oxford, where he was a Rhodes Scholar;

with honors in biochemistry from Case Western Reserve University.

We believe that Dr.

Gandhi’s financial, managerial and medical experience coupled with his substantial experience as an investor in emerging biotechnology companies provides him with the appropriate set of skills to serve as a member of the board of directors.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Delinquent Section 16(a) Reports

Section 16(a) of the Exchange Act requires our directors, executive officers and beneficial owners of more than 10% of our equity securities to file reports of holdings and transactions in securities of the Company with the SEC.

Based solely on a review of on Forms 3, 4 and 5 and any amendments thereto filed electronically with the Securities and Exchange Commission with respect to the most recent fiscal year and written representations from the reporting persons, we believe all Section 16(a) filing requirements were satisfied in 2021 with the exception of the following filing:

a Form 5 filing filed on February 14, 2022 by Diem Nguyen with respect to options granted by the Company in July 2021.

Code of Business Conduct and Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics.

The Code of Business Conduct and Ethics applies to all of our employees, officers (including our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions), agents and representatives, including directors and consultants.

The full text of our Code of Business Conduct and Ethics is posted on our website at www.candeltx.com .

We intend to disclose future amendments to certain provisions of our Code of Business Conduct and Ethics on our website.

The inclusion of our website address in this Annual Report does not include or incorporate by reference the information on our website into this Annual Report, and you should not consider that information a part of this Annual Report.

Audit Committee

The members of our audit committee are Shaan C.

Gandhi, M.D., D.Phil, Chris Martell, and Udi Meirav, Ph.D.

Christopher Martell is the chair of the audit committee.

Our board of directors has determined that all members of our audit committee will meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the Nasdaq listing rules and that Christopher Martell is an “audit committee financial expert”

(within the meaning of applicable SEC regulations).

Each of the members of the audit committee are independent pursuant to applicable Nasdaq listing standards.

Recommendation of Director Nominees by Stockholders

There have been no material changes to the procedures by which our stockholders may recommend nominees to the board of directors.

Limitations on Liability and Indemnification

As permitted by Delaware law, provisions in our amended and restated certificate of incorporation and amended and restated bylaws limit or eliminate the personal liability of directors for a breach of their fiduciary duty of care as a director.

The duty of care generally requires that, when acting on behalf of the corporation, a director exercise an informed business judgment based on all material information reasonably available to him or her.

Consequently, a director will not be personally liable to us or our stockholders for monetary damages or breach of fiduciary duty as a director, except for liability for:

any breach of the director’s duty of loyalty to us or our stockholders;

any act or omission not in good faith or that involves intentional misconduct or a knowing violation of law;

any act related to unlawful stock repurchases, redemptions or other distributions or payments of dividends;

any transaction from which the director derived an improper personal benefit.

These limitations of liability do not limit or eliminate our rights or any stockholder’s rights to seek non-monetary relief, such as injunctive relief or rescission.

These provisions will not alter a director’s liability under other laws, such as the federal securities laws or other state or federal laws.

Our amended and restated certificate of incorporation also authorizes us to indemnify our officers, directors and other agents to the fullest extent permitted under Delaware law.

As permitted by Delaware law, our amended and restated bylaws provide that:

we will indemnify our directors, officers, employees and other agents to the fullest extent permitted by law;

we must advance expenses to our directors and officers, and may advance expenses to our employees and other agents, in connection with a legal proceeding to the fullest extent permitted by law;

the rights provided in our amended and restated bylaws are not exclusive.

If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liability of a director or officer, then the liability of our directors or officers will be so eliminated or limited to the fullest extent permitted by Delaware law, as so amended.

Our amended and restated bylaws will also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in connection with their services to us, regardless of whether our bylaws permit such indemnification.

We have obtained such insurance.

In addition to the indemnification that is provided for in our amended and restated certificate of incorporation and amended and restated bylaws, we have entered into indemnification agreements with each of our directors and executive officers, which may be broader than the specific indemnification provisions contained in the Delaware General Corporation Law.

These indemnification agreements may require us, among other things, to indemnify our directors and executive officers for some expenses, including attorneys’

fees, expenses, judgments, fines and settlement amounts incurred by a director or executive officer in any action or proceeding arising out of his service as one of our directors or executive officers or any other company or enterprise to which the person provides services at our request.

We believe that these provisions and agreements are necessary to attract and retain qualified individuals to serve as directors and executive officers.

This description of the indemnification provisions of our amended and restated certificate of incorporation, our amended and restated bylaws and our indemnification agreements is qualified in its entirety by reference to these documents, each of which is attached as an exhibit to this Annual Report.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the Securities Act), may be permitted to our directors, officers and controlling persons pursuant to the foregoing provisions, or otherwise, we have been advised that, in the opinion of the SEC, such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

There is no pending litigation or proceeding naming any of our directors or officers as to which indemnification is being sought, nor are we aware of any pending or threatened litigation that may result in claims for indemnification by any director or officer.

The information required by this Item 10 will be included in our Definitive Proxy Statement to be filed with the Securities and Exchange Commission, or SEC, with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Executive Compensation.

Executive Compensation Overview

As an emerging growth company, we have opted to comply with the executive compensation disclosure rules applicable to “smaller reporting companies,”

as such term is defined in the rules promulgated under the Securities Act.

This section provides an overview of the compensation awarded to and earned by each individual who served as our principal executive officer at any time during our years ended December 31, 2021 and 2020 and to our next two most highly compensated executive officers in respect of their service to our company for our years ended December 31, 2021 and 2020.

We refer to these individuals as our named executive officers.

Our named executive officers are:

Paul Peter Tak, M.D., Ph.D., FMedSci, our President and Chief Executive Officer;

Estuardo Aguilar-Cordova, M.D., Ph.D., our Founder, former Chief Scientific Officer and former Chief Executive Officer;

John Canepa, our Chief Financial Officer.

Our executive compensation program is based on a pay-for-performance philosophy.

Compensation for our executive officers is composed primarily of the following main components:

base salary, bonus and equity incentives in the form of stock options.

Our executive officers, like all full-time employees, are eligible to participate in our health and welfare benefit plans.

As we complete our transition from a private company to a publicly traded company, we intend to evaluate our compensation values and philosophy and compensation plans and arrangements as circumstances require.

At a minimum, we expect to review executive compensation annually with input from a compensation consultant.

As part of this review process, we expect the board of directors and the compensation committee to apply our values and philosophy, while considering the compensation levels needed to ensure our executive compensation program remains competitive.

We will also review whether we are meeting our retention objectives and the potential cost of replacing a key employee.

Summary Compensation Table

The following table sets forth information regarding compensation awarded to and earned by our named executive officers for services rendered to us in all capacities during our years ended December 31, 2021 and 2020.

NAME AND PRINCIPAL POSITION

OPTION AWARDS (2)

NON EQUITY INCENTIVE PLAN COMP ENSATION (3)

NON QUALIFIED DEFERRED COMP ENSATION ON EARNINGS

ALL OTHER COMP ENSATION (4)

Paul Peter Tak, M.D., Ph.D., FMedSci,

President and Chief Executive Officer

Estuardo Aguilar-Cordova, M.D., Ph.D.,

Founder and Former Chief Executive Officer and Chief Scientific Officer (5)

Chief Financial Officer

The amounts reported in this column reflect the $170,000 total sign-on bonus pursuant to Dr.

Tak’s employment agreement with the Company, payable in four quarterly installments following September 12, 2020, a $104,000 discretionary bonus paid to Dr.

Aguilar-Cordova for performance in 2020, and a $75,000 sign-on bonus paid to Mr.

Canepa pursuant to his employment agreement with the Company.

The amounts reported in the “Option Awards”

column reflects the aggregate grant date fair value of share-based compensation awarded during the indicated year computed in accordance with the provisions of Financial Accounting Standards Board ASC Topic 718.

See Note 10 to our consolidated financial statements appearing elsewhere in this Annual Report regarding assumptions underlying the valuation of equity awards.

The amounts reported reflect annual bonuses earned based upon achievement of company and individual performance metrics.

Amounts reflected are paid in the year subsequent to the performance year.

Other compensation consists of the following:

(1) 401K employer match and (2) for Dr.

Tak only, $152,638 of housing and travel benefits.

In February 2022, Dr.

Aguilar-Cordova was removed from his position as Chief Scientific Officer of the Company.

Narrative to the Summary Compensation Table

Our named executive officers each receive a base salary to compensate them for services rendered to our company.

The base salary payable to each named executive officer is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities.

Base salaries are reviewed annually, typically in connection with our annual performance review process, approved by our board of directors or the compensation committee, and may be adjusted from time to time to realign salaries with market levels after taking into account individual responsibilities, performance, and experience.

For the fiscal year ended December 31, 2021, the annual base salary for Dr.

Aguilar-Cordova and Mr.

Canepa were $500,000, and $370,000, respectively, and the annual base salary for Dr.

Tak was $500,000 through August of 2021.

In September 2021, Dr.

Tak’s annual base salary was increased to $670,000.

For the fiscal year ended December 31, 2021, each of the named executive officers was eligible to earn an annual cash bonus based on the achievement of certain corporate and individual performance milestones.

The target annual bonus for each of Dr.

Aguilar-Cordova and Mr.

Canepa for the fiscal year ended December 31, 2021 were 50%, 50% and 40% of annual base salary, respectively.

Equity Compensation

Although we do not have a formal policy with respect to the grant of equity incentive awards to our executive officers, or any formal equity ownership guidelines applicable to them, we believe that equity grants provide our executive officers with a strong link to our long-term performance, create an ownership culture and help to align the interests of our executive officers and our stockholders.

In addition, we believe that equity grants with a time-based vesting feature promote executive retention because this feature incentives our executive officers to remain in our employment during the vesting period.

Accordingly, our board of directors periodically reviews the equity incentive compensation of our executives, including our named executive officers, and from time to time may grant equity incentive awards to them in the form of stock options.

We typically grant stock option awards at the start of employment to each executive officer and our other employees as well as on an annual basis for retention purposes.

We award our stock options on the date our board of directors or the CEO approves the grant.

We set the option exercise price equal to the fair market value of our common stock on the date of grant.

We maintain a tax-qualified retirement plan (the 401(k) Plan) that provides eligible U.S.

employees with an opportunity to save for retirement on a tax advantaged basis.

Eligible employees are able to defer eligible compensation subject to applicable annual Code limits.

Employees’

pre-tax or Roth contributions are allocated to each participant’s individual account and are then invested in selected investment alternatives according to the participants’

Employees are immediately and fully vested in their contributions.

Our 401(k) Plan is intended to be qualified under Section 401(a) of the Code with our 401(k) Plan’s related trust intended to be tax exempt under Section 501(a) of the Code.

tax-qualified retirement plan, contributions to our 401(k) Plan and earnings on those contributions are not taxable to the employees until distributed from our 401(k) Plan.

Health and Welfare Benefits

All of our named executive officers are eligible to participate in our employee benefit plans, including our medical, dental and vision insurance plans, in each case on the same basis as all of our other full-time employees.

We believe the perquisites described above are necessary and appropriate to provide a competitive compensation package to our named executive officers.

Rule 10b5-1 Sales Plans

Our directors and executive officers may adopt written plans, known as Rule 10b5-1 plans, in which they will contract with a broker to buy or sell shares of our common stock on a periodic basis.

Under a Rule 10b5-1 plan, a broker executes trades pursuant to parameters established by the director or officer when entering into the plan, without further direction from the director or officer.

The director or officer may amend or terminate the plan in some circumstances.

Our directors and executive officers may also buy or sell additional shares outside of a Rule 10b5-1 plan when they are not in possession of material, nonpublic information.

Employment Arrangements and Severance Agreements with our Named Executive Officers

We have entered into employment agreements with each of our named executive officers.

Paul Peter Tak, M.D., Ph.D.

Effective September 12, 2020, we entered into an employment agreement with Dr.

Tak, or the Tak Employment Agreement, for the position of President and Chief Executive Officer.

The Tak Employment Agreement provides for an annual base salary and an annual bonus opportunity.

Pursuant to the Tak Employment Agreement Dr.

Tak’s annual base salary will increase to $670,000 per year effective on the first anniversary of the commencement of his employment if the Company has completed an underwritten public offering on or prior to such date.

The Tak Employment Agreement provides for a signing bonus in the gross amount of $170,000, payable in four equal quarterly installments of $42,500 each, commencing on the first payroll date following the commencement of his employment and on each 3-month anniversary of employment following his start date, provided that he remains employed through each date of payment.

Pursuant to the Tak Employment Agreement, Dr.

Tak is eligible to receive a lump sum payment of $80,000 to assist with relocation to the Greater Boston Area if and when he relocates in 2022, subject to repayment if Dr.

Tak terminates his employment other than for “good reason”

or we terminate his employment for “cause”

(as such terms are defined in the Tak Employment Agreement) within 12 months of receipt of the relocation assistance payment.

Pursuant to the Tak Employment Agreement, we will reimburse Dr.

Tak for reasonable costs related to travel to Massachusetts and temporary housing in Massachusetts, not to exceed $20,000, which amount will be grossed up in respect of any related taxes, reasonable legal fees related to obtaining a visa, reasonable fees for independent tax and accounting advise not to exceed $10,000 per year, and reasonable legal fees related to negotiation of his employment agreement, not to exceed $10,000.

Tak is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Pursuant to the Tak Employment Agreement, in the event that Dr.

Tak’s employment is terminated by us without cause or by Dr.

Tak for good reason outside of the 3 month period preceding and 12 month period following the first event constituting a change in control (such period, the “change in control period”), subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to 12 months of base salary plus Dr.

Tak’s target bonus for the then-current year, less any payments Dr.

Tak receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 12 months commencing within 60 days of termination, and (ii) subject to the Dr.

Tak’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’

rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Dr.

Tak until the earlier of (A) 12 months following termination or (B) Dr.

Tak’s eligibility for group medical plan benefits under any other employer’s group medical plan.

In the event that such termination occurs during the change in control period, Dr.

Tak will, subject to the execution and effectiveness of a general severance and release of claims agreement within 60 days of such termination, be entitled to receive (x) a lump sum payment equal to 1.5 times the sum of Dr.

Tak’s then-current base salary (or base salary in effect immediately prior to the change in control, if higher), plus his target bonus for the then-current year (or his target bonus in effect immediately prior to the change in control, if higher), less any payments pursuant to Dr.

Tak receives pursuant to his restrictive covenants agreement with the Company, and (y) the benefits set forth in clause (ii) of the preceding sentence but for a period of 18 months.

In addition, pursuant to the Tak Employment

Agreement, all equity awards held by Dr.

Tak that are subject to time based vesting will fully accelerate as of the earlier of the consummation of a “change in control”

of the Company (as defined in the Tak Employment Agreement) or the termination of Dr.

Tak’s employment by the Company without cause or by Dr.

Tak for good reason.

Furthermore, in the event of a change of control or Dr.

Tak’s termination without cause or for good reason, Dr.

Tak will have no less than 12 months to exercise vested, unexpired stock options.

Estuardo Aguilar-Cordova, M.D., Ph.D.

Effective November 13, 2018, we entered into an amended and restated employment agreement with Dr.

Aguilar-Cordova, or the Estuardo Aguilar-Cordova Employment Agreement, for the position of President and Chief Executive Officer.

Aguilar-Cordova subsequently transitioned to the role of our Chief Scientific Officer in September 2020 until February 2022.

The Estuardo Aguilar-Cordova Employment Agreement provides for an annual base salary and an annual target bonus opportunity.

Aguilar-Cordova is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

The Estuardo Aguilar-Cordova Employment Agreement was terminated in February 2022.

Aguilar-Cordova’s employment was terminated by us without “cause”

(as such term was defined in the Estuardo Aguilar-Cordova Employment Agreement), upon the execution and effectiveness of a severance and release of claims agreement, he received (i) 12 months of base salary continuation, and (ii) subject to Dr.

Aguilar-Cordova’s timely election to continue COBRA health coverage, we will pay the premiums necessary to continue Dr.

Aguilar-Cordova’s and his covered dependents’

health insurance coverage until the earlier of (A) 12 months following termination or (B) Dr.

Aguilar-Cordova’s eligibility for group medical plan benefits under any other employer’s group medical plan.

Effective December 1, 2020, we entered into an employment agreement with Mr.

Canepa, or the Canepa Employment Agreement, for the position of Chief Financial Officer.

The Canepa Employment Agreement provides for an annual base salary and an annual target bonus opportunity.

Pursuant to the Canepa Employment Agreement Mr.

Canepa received a signing bonus in the gross amount of $75,000, which is subject to repayment if Mr.

Canepa voluntarily terminates his employment with the Company or if the Company terminates his employment for reasons excluding redundancy, ill health or a transfer of the part of the business in which he works within 12 months of the commencement of his employment.

Canepa is eligible to participate in the employee benefit plans available to our employees, subject to the terms of those plans.

Pursuant to the Canepa Employment Agreement, in the event that Mr.

Canepa’s employment is terminated by us without cause or by Mr.

Canepa for good reason, subject to the execution and effectiveness of a severance and release of claims agreement within 60 days of such termination, he will be entitled to receive (i) an amount equal to nine months of base salary plus Mr.

Canepa’s target bonus for the then-current year, less any payments Mr.

Canepa receives pursuant to his restrictive covenants agreement with the Company, payable in installments over 9 months commencing within 60 days of termination, and (ii) subject to the Mr.

Canepa’s timely election to continue COBRA health coverage and copayment of premium amounts at the applicable active employees’

rate, we will continue to pay the share of the premiums that we would have paid to provide health insurance to Mr.

Canepa until the earlier of (A) nine months following termination or (B) Mr.

Canepa’s eligibility for group medical plan benefits under any other employer’s group medical plan.

Pursuant to the Canepa Employment Agreement, all equity awards held by Mr.

Canepa that are subject to time based vesting will fully accelerate if Mr.

Canepa’s employment is terminated by the Company without “cause”

Canepa for “good reason”

within one month prior to or 12 months following the consummation of a “change in control”

(as such terms are defined in the Canepa Employment Agreement).

Outstanding Equity Awards

The following table sets forth information concerning outstanding equity awards held by our named executive officers as of December 31, 2021.

Option Awards (1)

NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) EXERCISABLE

NUMBER OF SECURITIES UNDERLYING UNEXERCISED OPTIONS (#) UNEXERCISABLE

EQUITY INCENTIVE PLAN AWARS:

NUMBER OF SECURITIES UNDERLYING UNEXERCISED UNEARNED OPTIONS(#)

OPTION EXERCISE PRICE

OPTION EXPIRATION DATE

Paul Peter Tak, M.D., Ph.D.

President and Chief Executive Officer

Estuardo Aguilar-Cordova, M.D., Ph.D.

Founder and Former Chief Executive Officer and Chief Scientific Officer

Chief Financial Officer

Each of the outstanding equity awards in the table above was granted pursuant to our 2015 Stock Plan, as amended, or the 2015 Plan

Represents stock option granted on October 10, 2020.

The shares underlying this option vest as follows:

25% vested upon grant date, 25% vesting on the first anniversary of October 10, 2020, and the remainder vesting thereafter in 36 equal monthly installments

The shares underlying this option shall vest (if at all) if a specified stock price is obtained on or prior to September 12, 2023.

In February 2022, Dr.

Aguilar-Cordova was removed from his position as Chief Scientific Officer of the Company and all of his stock options became fully vested.

Represents stock option granted on October 13, 2018.

The shares underlying this option vest in four equal annual installments following October 13, 2018.

The shares underlying this option shall vest upon achievement of a specified clinical milestone on or prior to November 12, 2023.

Represents stock option granted on January 1, 2019.

The shares underlying this option vest as follows:

25% upon grant date and the remainder vest in three equal annual installments following January 1, 2019.

Represents stock option granted on December 15, 2020.

The shares underlying this option vest as follows:

35% vesting on the first anniversary of December 1, 2020, 35% vest in equal monthly installments over months 13 to 24 following December 1, 2020, 15% vest in equal monthly installments over months 25 to 36 following December 1, 2020, and 15% vest in equal monthly installments over months 37 to 48 following December 1, 2020.

Compensation Risk Assessment

We believe that although a portion of the compensation provided to our executive officers and other employees is performance-based, our executive compensation program does not encourage excessive or unnecessary risk taking.

This is primarily due to the fact that our compensation programs are designed to encourage our executive officers and other employees to remain focused on both short-term and long-term strategic goals.

As a result, we do not believe that our compensation programs are reasonably likely to have a material adverse effect on us.

Director Compensation

The following table presents the total compensation for each person who served as a non-employee member of our board of directors and received compensation for such service during the year ended December 31, 2021.

Other than as set forth in the table and described more fully below, we did not pay any compensation, make any equity awards to, or pay any other compensation to any of the non-employee members of our board of directors in 2021.

Tak, our President and Chief Executive Officer, and Dr.

Aguilar-Cordova, our Founder and former Chief Executive Officer and Chief Scientific Officer, did not receive any additional compensation for their service as a member of our board of directors.

Tak’s and Dr.

Aguilar-Cordova’s compensation for service as an employee for year ended December 31, 2021 is presented in “Executive Compensation-Summary Compensation Table.”

We reimburse non-employee members of our board of directors for reasonable travel and out-of-pocket expenses incurred in connection with attending board of directors and committee meetings.

Director Compensation Table - 2021

FEES EARNED OR PAID IN CASH ($)

OPTION AWARDS ($) (1)

ALL OTHER COMPENSATION ($)

Benz, Jr., M.D.

Gandhi, M.D., D.Phil (2)

Chris Martell

Udi Meirav, Ph.D.

Diem Nguyen, Ph.D.

Alan E Smith, Ph.D., FRS, CBE

Represents stock options granted in 2021.

In accordance with SEC rules, these columns reflect the aggregate grant date fair value of the option awards granted during 2021 computed in accordance with Financial Accounting Standard Board ASC Topic 718 for stock-based compensation transactions.

Gandhi disclaimed director compensation in connection with service on our board of directors in accordance with the standard policy of Northpond Ventures .

Non-Employee Director Compensation Policy

Our board of directors has adopted a non-employee director compensation policy that is designed to enable us to attract and retain, on a long-term basis, highly qualified non-employee directors.

The fees paid to independent non-employee directors for service on our board of directors and for service on each committee of our board of directors on which the director is a member are set forth below:

MEMBER ANNUAL FEE ($)

CHAIRMAN ADDITIONAL ANNUAL FEE ($)

Board of Directors (1)

Audit Committee

Compensation Committee

Nominating and Corporate Governance Committee

Gandhi disclaims director compensation in connection with service on our board of directors in accordance with the standard policy of Northpond Ventures .

In addition, each non-employee director elected or appointed to our board of directors will be granted an initial one-time non-qualified stock option to purchase 28,480 shares of our common stock, based on the current fair market value of our common stock, which shall vest in equal monthly installments over three years from the date of grant, subject to continued service through such vesting date(s).

In addition, at the end of each year, each non-employee director, other than a director receiving an initial equity award, will be granted a non-qualified stock option to purchase 14,240 shares of our common stock, based on the then fair market value of our common stock, which will vest and become fully exercisable upon the earlier of (i) the first anniversary of the grant date or (ii) our next annual meeting of stockholders, subject to such director’s continued service as a director through such vesting date(s).

The information required by this Item 11 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

Securities authorized for issuance under equity compensation plans

The following table provides information relating to our equity compensation plans as of December 31, 2021.

As of December 31, 2021, we had two equity compensation plans, our 2021 Stock Option and Incentive Plan and our Employee Stock Purchase Plan, which were approved by our Board of Directors and our stockholders.

Number of securities to be issued upon exercise of outstanding Options, Warrants and Rights

Weighted-average exercise price of outstanding options, warrants, and rights

Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))

Equity compensation plans approved by stockholders

Equity compensation plans not approved by stockholders

Security Ownership of Certain Beneficial Owners

The following table sets forth certain information known to us regarding beneficial ownership of our capital stock outstanding as of March 1, 2022 for:

each person, or group of affiliated persons, who is known by us to be the beneficial owner of five percent or more of our outstanding common stock;

each of our directors;

each of our named executive officers;

all of our current directors and executive officers as a group.

We have determined beneficial ownership in accordance with the rules of the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose.

These rules generally attribute beneficial ownership of securities to persons who possess sole or shared voting power or investment power with respect to those securities as well as any shares of common stock that the person has the right to acquire within 60 days of March 1, 2 022 through the exercise of stock options or other rights.

These shares are deemed to be outstanding and beneficially owned by the person holding those options for the purpose of computing the percentage ownership of that person, but they are not treated as outstanding for the purpose of computing the percentage ownership of any other person.

Unless otherwise indicated, the persons or entities identified in this table have sole voting and investment power with respect to all shares shown as beneficially owned by them.

Each individual or entity shown on the table has furnished information with respect to beneficial ownership.

Except as otherwise indicated below, the address of each officer, director and five percent stockholder listed below is c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494.

The percentage of beneficial ownership in the table below is based o n 28,691,088 sha res of common stock deemed to be outstanding as of Marc h 1, 20 22.

5% or Greater Shareholders:

Northpond Ventures, LP (2)

Entities Affiliated with FMR, LLC (3)

Named Executive Officers and Directors:

Paul Peter Tak, M.D., Ph.D.

Alan E Smith, Ph.D., FRS, CBE (6)

Chris Martell (7)

Diem Nguyen, Ph.D.

Benz, Jr., M.D.

Estuardo Aguilar-Cordova, M.D., inf., Ph.D.

Gandhi, M.D., D.Phil

Udi Meirav, Ph.D.

Francesca Barone, M.D., Ph.D.

Nathan Caffo (13)

John Canepa (14)

Susan Stewart (15)

All Executive Officers and Directors as a group (13 persons) (16)

* Less than one percent.

Consists of (i) 931,039 shares of common stock, of which 898,640 shares of common stock are held solely by Dr.

Aguilar, and 32,399 shares of common stock are held jointly with her spouse, Estuardo Aguilar-Cordova, M.D., inf., Ph.D., (ii) 2,013,100 shares held for the benefit of Dr.

Aguilar by the Laura K.

Aguilar 2020 Irrevocable Trust, (iii) 171,335 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, and (iv) 3,224,105 shares deemed to be beneficially owned by her spouse, of which 983,524 shares of common stock are held solely by her spouse, 2,074,942 shares are held for the benefit of her spouse by the Estuardo Aguilar-Cordova 2020 Irrevocable Trust and 165,639 shares of common stock are issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Laura shares voting and investment power over the securities held by her spouse.

Consists of 1,685,768 shares of our common stock issued upon conversion of our Series C Preferred Stock held by Northpond Ventures, LP (“Northpond”).

Northpond LP is managed by Northpond Ventures GP, LLC (“Northpond LLC”) and Northpond LLC may be deemed to beneficially own such shares.

Michael Rubin is the managing member of Northpond LLC and may also be deemed to beneficially own such shares.

The business address for each person and entity named in this footnote is 7500 Old Georgetown Rd, Suite 850, Bethesda, MD 20814.

Based solely on information contained in the most recently filed Schedule 13G of FMR LLC filed with the SEC on February 9, 2022, reflecting beneficial ownership as of December 31, 2021.

According to this Schedule 13G, FMR LLC and its Chairman, Abigail P.

Johnson, reported the beneficial ownership of 2,262,842 shares on behalf of Fidelity Management & Research Company LLC, , a wholly owned subsidiary of FMR LLC and a registered investment adviser, and had no sole voting power these shares, no shared voting power, sole dispositive power for 2,262,842 of these shares and no shared dispositive power.

The address of FMR LLC is 245 Summer Street, Boston, Massachusetts 02210

Consists of 25,000 shares of common stock and 1,063,476 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of (i) 1,681,000 shares of common stock held by Paul and Diane Manning, JTWROS;

(ii) 642,406 shares of the Issuer’s common stock held by The Paul B.

Manning Revocable Trust dated May 10, 2000;

(iii) 642,406 shares of common stock issuable upon the exercise of a warrant within 60 days of December 31, 2021 held by The Paul B.

Manning Revocable Trust dated May 10, 2000;

(iv) 553,752 shares of the Issuer’s common stock held by BKB Growth Investments, LLC;

and (v) 553,752 shares of common stock issuable upon the exercise of a warrant within 60 days of December 31, 2021 held by BKB Growth Investments, LLC.

Manning is a co-manager of Tiger Lily Capital, LLC, the manager of BKB, and has shared voting and investment power with respect to the shares held by BKB.

Consists of 32,548 shares of common stock and 36,616 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of (i) 32,548 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, (ii) 283,514 shares of common stock held by GTAM1 2012 ADV LLC, of which Mr.

Martell serves as Manager, (iii) 283,514 warrants held by GTAM1 2012 Trust, of which Mr.

Martell serves as trustee but is not a beneficiary, and (iv) 125,000 shares of common stock held by GTAM1 2012 Trust.

Martell disclaims beneficial ownership over all of these interests, except for his beneficial ownership in the 32,548 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 10,000 shares of common stock and 7,120 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 69,164 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of (i) 1,015,923 shares of common stock, of which 983,524 shares of common stock are held solely by Dr.

Aguilar-Cordova, and 32,399 shares of common stock are held jointly with his spouse, Laura K.

Aguilar, M.D., Ph.D., (ii) 2,074,942 shares held for the benefit of Dr.

Aguilar-Cordova by the Estuardo Aguilar-Cordova 2020 Irrevocable Trust (iii) 165,639 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022, and (iv) 3,083,075 shares deemed to be beneficially owned by his spouse, of which 898,640 shares of common stock are held solely by his spouse, 2,013,100 shares are held for the benefit of his spouse by the Laura K.

Aguilar 2020 Irrevocable Trust and 171,335 shares of common stock are issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Aguilar-Cordova shares voting and investment power over the securities held by his spouse.

Consists of 48,822 shares of common stock and 115,951 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 1,500 shares of common stock and 17,685 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 6,000 shares of common stock and 117,223 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 10,125 shares of common stock and 151,360 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of 10,442 shares of common stock issuable upon the exercise of options exercisable within 60 days after March 1, 2022.

Consists of (i) 7,706,690 shares common stock, (ii) options to purchase 1,854,989 shares of common stock exercisable within 60 days of March 1, 2022 and (iii) warrants to purchase 283,514 shares of common stock exercisable within 60 days of March 1, 2022, held by thirteen executive officers and directors, and entities affiliated with such executive officers and directors, as described in notes (4) through (15) above.

Communications with the Board of Directors

Stockholders who want to communicate with members of the Board, including the independent directors, individually or as a group, should address their communications to the Board, the Board members or the Board committee, as the case may be, and send them by mail to c/o Candel Therapeutics, Inc., 117 Kendrick St, Suite 450, Needham, Massachusetts 02494.

The Chair of the Audit Committee will forward all such communications directly to such Board members.

Any such communications may be made on an anonymous and confidential basis.

A copy of any such written communication may also be forwarded to the Company’s legal counsel and a copy of such communication may be retained for a reasonable period of time.

The director may discuss the matter with the Company’s legal counsel, with independent advisors, with non-management directors, or with the Company’s management, or may take other action or no action as the director determines in good faith, using reasonable judgment, and applying his or her own discretion.

The Audit Committee oversees the procedures for the receipt, retention, and treatment of complaints received by the Company regarding accounting, internal accounting controls, or audit matters, and the confidential, anonymous submission by employees of concerns regarding questionable accounting, internal accounting controls or auditing matters.

The Company has also established a toll-free telephone number for the reporting of such activity, which is 855-590-2335.

Board Committees

Our Board of Directors has established an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance committee, each of which operates pursuant to a charter adopted by our Board of Directors.

We believe that the composition and functioning of all of our committees will comply with the applicable requirements of Nasdaq, the Sarbanes-Oxley Act of 2002 and SEC rules and regulations that will be applicable to us.

We intend to comply with future requirements to the extent they become applicable to us.

The full text of our Audit Committee charter, Compensation Committee charter, and Nominating and Corporate Governance charter are posted on the investor relations portion of our website at www.candeltx.com.

We do not incorporate the information contained on, or accessible through, our corporate website into this Annual Report, and you should not consider it a part of this Annual Report.

The information required by this Item 12 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Certain Relationships and Related Transactions, and Director Independence.

The following is a description of transactions or series of transactions since January 1, 2021 to which we were or will be a party, in which:

the amount involved in the transaction exceeds, or will exceed, $120,000 (or, if less, 1% of the average of our total assets amounts at December 31, 2019 and 2020);

in which any of our executive officers, directors or holder of five percent or more of any class of our capital stock, including their immediate family members or affiliated entities, had or will have a direct or indirect material interest.

Compensation arrangements for our named executive officers and our directors are described elsewhere in this Annual Report under “Director Compensation”

and “Executive Compensation.”

All amounts in thousands unless otherwise noted.

Participation in our Initial Public Offering

Certain of our directors, executive officers and our 5% stockholders purchased shares of our common stock in our IPO at the initial public offering price.

The following table sets forth the number of shares of our common stock purchased by directors, executive officers and 5% stockholders and their affiliates and the aggregate purchase price paid for such shares.

Shares of Common Stock Purchased

Aggregate Cash Purchase Price

Paul Peter Tak, M.D., Ph.D., FMedSci

Diem Nguyen, Ph.D., M.B.A.

GTAM1 2012 LLC (1)

(1) GTAM1 2012 LLC is wholly owned by a trust for which Christopher Martell serves as trustee

Amended and Restated Investors’

Rights Agreement

We are a party to an amended and restated investors’

rights agreement, or the Investors’

Rights Agreement, dated as of March 19, 2020, with certain of our stockholders, including principal stockholders and their affiliates.

The Investors’

Rights Agreement provides these holders the right to demand that we file a registration statement or request that their shares be covered by a registration statement that we are otherwise filing.

Employment Agreements

We have entered into employment agreements with certain of our executive officers.

See “Item 11-Executive Compensation-Employment Arrangements and Severance Agreements with our Named Executive Officers.”

Equity Grants

We have granted stock options to certain of our executive officers and members of our board of directors.

See “Item 11-Executive Compensation.”

Indemnification Agreements

In addition, we have entered into indemnification agreements with each of our executive officers and the members of our board of directors which may require us to indemnify them.

See “Item 11-Executive Compensation-Limitations on Liability and Indemnification”

Policies for Approval of Related Party Transactions

Our board of directors reviews and approves transactions with directors, officers and holders of 5% or more of our voting securities and their affiliates, each a related party.

Prior to our initial public offering, the material facts as to the related party’s relationship or interest in the transaction were disclosed to our board of directors prior to their consideration of such transaction, and the transaction was not considered approved by our board of directors unless a majority of the directors who are not interested in the transaction approved the transaction.

Further, when stockholders were entitled to vote on a transaction with a related party, the material facts of the related party’s relationship or interest in the transaction were disclosed to the stockholders, who must have approved the transaction in good faith.

In connection with our initial public offering, our board of directors adopted a written related party transactions policy.

Pursuant to this policy, the audit committee has the primary responsibility for reviewing and approving or disapproving “related party transactions,”

which are transactions between us and related persons in which the aggregate amount involved exceeds or may be expected to exceed $120,000 and in which a related person has or will have a direct or indirect material interest.

For purposes of this policy, a related person will be defined as a director, executive officer, nominee for director, or greater than 5% beneficial owner of our common stock, in each case since the beginning of the most recently completed year, and their immediate family members.

Director Independence

Under the Nasdaq listing rules, independent directors must comprise a majority of a listed company’s board of directors within twelve months from the date of listing.

In addition, the Nasdaq listing rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation and nominating and governance committees be independent within twelve months from the date of listing.

Audit committee members must also satisfy additional independence criteria, including those set forth in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the Exchange Act), and compensation committee members must also satisfy the independence criteria set forth in Rule 10C-1 under the Exchange Act.

Under Nasdaq listing rules, a director will only qualify as an “independent director”

if, in the opinion of that company’s board of directors, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director.

In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee:

(1) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries, other than compensation for board service;

or (2) be an affiliated person of the listed company or any of its subsidiaries.

In order to be considered independent for purposes of Rule 10C-1, the board of directors must consider, for each member of a compensation committee of a listed company, all factors specifically relevant to determining whether a director has a relationship to such company which is material to that director’s ability to be independent from management in connection with the duties of a compensation committee member, including, but not limited to:

the source of compensation of the director, including any consulting advisory or other compensatory fee paid by such company to the director, and whether the director is affiliated with the company or any of its subsidiaries or affiliates.

Director Affiliations

Some of our directors are affiliated with and serve on the board of directors as representatives of entities which beneficially own or owned 5% or more of our common stock, as indicated below:

Principal Stockholder

Gandhi, M.D., D.Phil

Northpond Ventures, L.P.

The information required by this Item 13 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Principal Accounting Fees and Services.

Our independent public accounting firm is KPMG LLP, McLean, Virginia, PCAOB Auditor ID :

The Audit Committee has selected KPMG LLP as our independent registered public accounting firm for the years ended December 31, 2021 and 2020.

In addition to retaining KPMG LLP to audit our consolidated financial statements for years ended December 31, 2021 and 2020, we may engage the firm from time to time during the year to perform other services.

The following table sets forth the aggregate fees billed by KPMG LLP in connection with services rendered during the last two fiscal years.

For the Year Ended

Audit Fees consist of fees for professional services rendered in connection with the audit of our annual consolidated financial statements, the review of the interim consolidated financial statements included in quarterly reports, services rendered in connection with SEC registration statements, including the IPO, and services that are normally provided by KPMG LLP, such as comfort letters, in connection with statutory and regulatory filings or engagements.

In fiscal 2021 and 2020, no services other than those discussed above were provided by KPMG LLP.

The Audit Committee has adopted a policy requiring pre-approval of all audit and non-audit related services to be performed by the Company’s independent auditor regardless of amount.

These services may include audit services, audit-related services, tax services and other related services.

KPMG LLP and management are required to periodically report to the Audit Committee regarding the extent of services provided by KPMG LLP in accordance with this pre-approval and the fees for the services performed to date.

The Audit Committee may also pre-approve particular services on a case-by-case basis.

The Audit Committee annually evaluates the qualifications, performance and independence of the Company’s independent registered public accounting firm.

It selected KPMG as the Company’s independent registered public accounting firm for 2021.

This selection was subsequently approved by the Board .

The Audit Committee has reviewed and discussed with management and with KPMG the Company’s audited consolidated financial statements for the year ended December 31, 2021.

In addition, the Audit Committee has discussed with KPMG the matters that independent registered public accounting firms must communicate to audit committees under applicable PCAOB standards.

The Audit Committee has also discussed and confirmed with KPMG its independence from the Company and received all written disclosures and correspondence required by the PCAOB Ethics and Independence requirement s.

The Audit Committee has evaluated and concluded the non-audit services provided by KPMG to the Company do not impair KPMG’s independence.

Based on the reviews and discussions referred to above, the Audit Committee recommended to our Board that the audited consolidated financial statements for the year ended December 31, 2021 and the related footnotes be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.

Our independent public accounting firm is KPMG LLP, Boston, Massachusetts, PCAOB Auditor ID 185

The information required by this Item 14 will be included in our Definitive Proxy Statement to be filed with the SEC with respect to our 2023 Annual Meeting of Stockholders and is incorporated herein by reference.

Exhibits, Financial Statement Schedules.

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Financial statement schedules have been omitted because they are either not required or not applicable or the information is included in the consolidated financial statements or the notes thereto.

(3) Exhibits:

Amended and Restated Certificate of Incorporation of Candel Therapeutics, Inc.

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333- 257444) filed with the SEC on July 16, 2021)

Description of Securities

Description of Securities (incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 29, 2022)

Investors’

45 unchanged sentences

333- 257444) filed with the SEC on July 16, 2021)

Loan and Security Agreement by and between the Registrant and Silicon Valley Bank, dated February 24, 2022

Employment Agreement by and between Candel Therapeutics and Francesca Barone dated February 3, 2022

Loan and Security Agreement by and between the Registrant and Silicon Valley Bank, dated February 24, 2022 (incorporated by reference to Exhibit 10.11 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 29, 2022)

Employment Agreement by and between Candel Therapeutics and Francesca Barone dated February 3, 2022 (incorporated by reference to Exhibit 10.12 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 29, 2022)

Consulting Agreement by and between Candel Therapeutics, Inc.

and Susan Stewart dated October 19, 2021.

List of Subsidiary

and Susan Stewart dated October 19, 2021 (incorporated by reference to Exhibit 10.13 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 29, 2022)

Employment Agreement by and between Candel Therapeutics and Seshu Tyagarajan dated April 14, 2022 (incorporated by reference to Exhibit 10.8 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on May 12, 2022)

Employment Agreement by and between Candel Therapeutics and Jason A.

Amello dated September 21, 2022 (incorporated by reference to Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q filed with the SEC on November 10, 2022)

Master Production Services Agreement by and between Candel Therapeutics and SAFC Carlsbad, Inc., effective November 3, 2022

List of Subsidiary (incorporated by reference to Exhibit 21.1 to the Registrant's Annual Report on Form 10-K filed with the SEC on March 29, 2022)

Consent of KPMG LLP, Independent Registered Public Accounting Firm

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Form 10-K Summary

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized .

March 29, 2022

/s/ Paul Peter Tak

Paul Peter Tak, M.D., Ph.D., FMedSci

President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated.

/s/ Paul Peter Tak

President and Chief Executive Officer

(Principal Executive Officer)

March 29, 2022

Paul Peter Tak, M.D., Ph.D.

/s/ John Canepa

Chief Financial Officer (Principal Financial and Accounting Officer)

March 29, 2022

/s/ Paul B Manning

March 29, 2022

Paul B Manning

/s/ Edward J.

March 29, 2022

Benz, Jr, M.D.

/s/ Chris Martell

March 29, 2022

Chris Martell

/s/ Udi Meirav

March 29, 2022

Udi Meirav, Ph.D.

March 29, 2022

Smith, Ph.D., FRS, CBE

/s/ Estuardo Aguilar-Cordova

March 29, 2022

Estuardo Aguilar-Cordova, M.D.

March 29, 2022

Gandhi, M.D., D.

/s/ Diem Nguyen

March 29, 2022

Diem Nguyen, Ph.D., MBA

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

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Consolidated Balance Sheets

Consolidated Statement of Operations and Comprehensive Loss

Consolidated Statement of Convertible Preferred Stock and Stockholders’

Consolidated Statements of Operations

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Consolidated Statement of Cash Flows

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

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Opinion on the Consolidated Financial Statements

We have audited the accompanying consolidated balance sheets of Candel Therapeutics, Inc and subsidiary (the Company) as of December 31, 2021 and 2020, the related consolidated statements of operations and comprehensive loss, convertible preferred stock and stockholders’

deficit, and cash flows for each of the years in the two-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements).

We have audited the accompanying consolidated balance sheets of Candel Therapeutics, Inc.

and subsidiary (the Company) as of December 31, 2022 and 2021, the related consolidated statements of operations, convertible preferred stock and stockholders’

equity (deficit), and cash flows for each of the years in the two-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the two-year period ended December 31, 2022, in conformity with U.S.

generally accepted accounting principles.

Change in Accounting Principle

As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2022 due to the adoption of Accounting Standards Update No.

2016-02, Leases (Topic 842) and Accounting Standards Update No.

2018-11, Leases (Topic 842):

Targeted Improvements.

Basis for Opinion

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that our audits provide a re asonable basis for our opinion.

We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2019

McLean, Virginia

Boston, Massachusetts

March 30, 2023

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Fixed assets, net

Other long-term assets

Liabilities, Convertible Preferred Stock and Stockholders’

Equity (Deficit)

Lease right of use assets

Restricted cash

Liabilities and Stockholders’

Current liabilities:

1 unchanged sentence

Accrued expenses

Paycheck protection program loan

Current portion of lease liability

Other current liabilities

1 unchanged sentence

Deferred revenue

Long-term debt

Deferred rent

Term loan payable to a bank

Other long-term debt

Lease liability, net of current portion

Warrant liability

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Commitments and contingencies (Note 15)

Convertible preferred stock:

Series B convertible preferred stock, $ 0.01 par value;

0 and 11,155,506

shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively.

Series C convertible preferred stock, $ 0.01 par value;

0 and 6,032,170

shares authorized, issued and outstanding at December 31, 2021 and 2020, respectively.

Stockholders’

Preferred stock, $ 0.01 par value;

10,000,000 shares authorized at

December 31, 2021, no shares issued or outstanding at

December 31, 2021

10,000,000 shares authorized at December 31, 2022 and 2021;

no shares issued or outstanding at December 31, 2022 and 2021, respectively.

Common stock, $ 0.01 par value;

150,000,000 and 75,000,000 shares authorized at December 31, 2021 and 2020, respectively,

shares issued and outstanding 28,689,842 and 11,635,094 at December 31, 2021 and 2020, respectively.

150,000,000 shares authorized at December 31, 2022 and 2021;

29,042,418 and 28,689,842 shares issued at December 31, 2022 and 2021, respectively;

and 28,919,810 and 28,689,842 shares outstanding at December 31, 2022 and 2021, respectively.

Treasury stock (at cost)

Additional paid-in capital

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Total stockholders’

equity (deficit)

Total liabilities, convertible preferred stock and stockholders’

equity (deficit)

Total liabilities and stockholders’

The accompanying notes are an integral part of these consolidated financial statements.

Candel Therapeutics, Inc.

Consolidated Statements of Ope rations and Comprehensive Loss

Consolidated Statements of Ope rations

(In thousands, except share and per share amounts)

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Other income (expense):

Interest, dividend and investment income (expense), net

Interest and dividend income (expense), net

Change in fair value of warrant liability

Total other income (expense), net

Other comprehensive gain:

Unrealized gain on available-for-sale securities

Comprehensive loss

Net loss per share attributable to common stockholders, basic and diluted

Weighted-average shares used in computing net loss per share

attributable to common stockholders, basic and diluted

Net loss per share, basic and diluted

Weighted-average common shares outstanding, basic and diluted

The accompanying notes are an integral part of these consolidated financial statements.

Candel Thrapeutics, Inc.

Consolidated Statements of Convertible Pre ferred Stock and Stockholders’

Consolidated Statements of Convertible Preferred Stock and Stockholders’

Equity (Deficit)

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PREFERRED STOCK

TREASURY STOCK

PAID-IN CAPITAL

ACCUMULATED OTHER

COMPREHENSIVE LOSS

STOCKHOLDERS’

EQUITY (DEFICIT)

Balance as of December 31, 2019

Options exercised

Stock-based compensation

Increase in fair value of NC

Ohio Trust Warrants

Recognition of unrealized loss

on marketable securities

Balance as of December 31, 2020

Balance as of

December 31, 2020

Options exercised

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Stock-based compensation

Change in fair value of NC Ohio

Trust Warrants

Conversion of Series B Preferred Stock to Common Stock

Conversion of Series C Preferred Stock to Common Stock

Change in fair value of

NC Ohio Trust Warrants

Conversion of Series B

Preferred Stock to

Conversion of Series C

Preferred Stock to

Proceeds from IPO, net

Balance as of December 31, 2021

Balance as of

December 31, 2021

Options exercised

Treasury stock acquired

Stock-based compensation

Change in fair value of

NC Ohio Trust Warrants

Balance as of

December 31, 2022

The accompanying notes are an integral part of these consolidated financial statements.

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Non-cash stock compensation expense

Non-cash lease expense

Non-cash interest expense

Change in fair value of warrant liability

PPP loan forgiveness

Accretion of debt discount

Paycheck protection program loan forgiveness

Changes in operating assets and liabilities:

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Deferred rent

Lease liability

Net cash used in operating activities

Cash Flows from Investing Activities:

Purchase of available-for-sale securities

Proceeds from maturities and sales of available-for-sale securities

Purchase of fixed assets

Net cash provided by (used in) investing activities

Net cash used in investing activities

Cash Flows from Financing Activities:

Proceeds from IPO

Proceeds from paycheck protection program loan

Proceeds from warrant exercises

Net proceeds from initial public offering

Net proceeds from bank term loan

Proceeds from option exercises

Proceeds from warrant exercises

Net cash provided by financing activities

Net increase in cash

Net increase (decrease) in cash

Cash, cash equivalents and restricted cash at beginning of period

Cash, cash equivalents and restricted cash at end of period

Supplemental Disclosures of Cash Flow Information:

Supplemental cash flow information:

Cash paid for taxes

Cash paid for interest

Supplemental disclosures of non-cash information:

Lease liability arising from obtaining right-of-use assets

Capital expenditures in accounts payable and accrued expenses

Common stock exchange for option exercise

The accompanying notes are an integral part of these consolidated financial statements.

Candel Therapeutics, Inc.

Notes to fin ancial statements

(Amounts in thousands, except share and per share amounts)

Notes to consolidated fin ancial statements

Organization and Basis of Presentation

Candel Therapeutics, Inc., formerly known as Advantagene, Inc.

(the “Company”) is a late clinical stage biotechnology company that was incorporated in Delaware in June 2003.

(the Company) is a late clinical stage biotechnology company that was incorporated in Delaware in June 2003.

On November 30, 2020, the Company changed its name to Candel Therapeutics, Inc.

The Company is focused on helping patients fight cancer with oncolytic viral immunotherapies.

The Company is focused on developing and commercializing viral immunotherapies to help patients fight cancer.

The Company’s engineered viruses are designed to induce immunogenic cell death through direct viral –

mediated cytotoxicity in cancer cells, thus releasing tumor neo-antigens and creating a pro-inflammatory microenvironment at the site of injection.

The Company has established two oncolytic viral immunotherapy platforms and our two product candidates, CAN-2409 and CAN-3110, are in clinical trials for a number of tumor types.

The Company has established two clinical stage viral immunotherapy platforms and its two product candidates, CAN-2409 and CAN-3110, are in clinical trials for a number of tumor types.

In addition, the Company recently announced a collaboration with the University of Pennsylvania (Penn) to study the impact of novel viral immunotherapies based on Candel's propriety enLIGHTEN Discovery Platform to strengthen the effects of Penn's investigational CAR-T cell therapies in solid tumor models.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations.

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Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

The Company has funded its operations primarily with proceeds from the sale of its capital stock and convertible notes.

The Company has incurred recurring losses since its inception, including a net loss of $ 36,124 and $ 17,680 for the years ended December 31, 2021, and 2020, respectively.

In addition, as of December 31, 2021, the Company had an accumulated deficit of $ 80,295 .

The Company has funded its operations primarily with proceeds from the sale of its convertible notes and capital stock and from debt borrowings.

The Company has incurred recurring losses since its inception, including a net loss of $ 18.8 million and $ 36.1 million for the years ended December 31, 2022, and 2021, respectively.

In addition, as of December 31, 2022, the Company had an accumulated deficit of $ 99.1 million .

The Company expects to continue to generate operating losses for the foreseeable future.

On July 29, 2021, the Company completed its initial public offering of common stock, or the IPO, at which time the Company issued 9,000,000 shares of its common stock at a price to the public of $ 8.00 per share, and on August 13, 2021, the Company issued an additional 887,994 common shares at $ 8.00 per share as a partial exercise of the underwriters’

option to purchase additional shares, resulting in net proceeds to the Company of $ 71,335 , after deducting underwriting discounts and commissions and offering expenses.

On July 29, 2021, the Company completed its initial public offering of common stock (the IPO) at which time the Company issued 9,000,000 shares of its common stock at a price to the public of $ 8.00 per share, and on August 13, 2021, the Company issued an additional 887,994 shares of common stock at $ 8.00 per share as a partial exercise of the underwriters’

option to purchase additional shares, resulting in net proceeds to the Company of $ 71.3 million , after deducting underwriting discounts and commissions and offering expenses.

Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,066,398 shares of common stock.

On August 5, 2022, the Company filed a shelf registration statement on Form S-3 (the Shelf) with the SEC, which covers the offering, issuance, and sale by us of up to an aggregate of $ 200.0 million of our common stock, preferred stock, debt securities, warrants and/or units of any combination thereof.

We simultaneously entered into a sales agreement with Jefferies LLC, as sales agent, to provide for the issuance and sale by us of up to $ 75.0 million of our common stock from time to time in “at-the-market”

offerings under the Shelf (the ATM Program).

The Shelf was declared effective by the SEC on August 12, 2022.

As of the date hereof, no sales have been made pursuant to the ATM Program.

The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.

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The Company believes that existing resources will fund planned operations for at least 12 months from the date that these consolidated financial statements were available to be issued.

Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company continue as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Reverse stock split

On July 14, 2021, the Company’s board of directors and stockholders approved a one-for- 2.4579 reverse stock split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock which became effective on July 15, 2021.

Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split.

Accordingly, the consolidated financial statements have been prepared on a basis that assumes the Company continues as a going concern and contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB).

The FASB sets GAAP that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently reported.

References to GAAP

issued by the FASB in these notes to the financial statements are to the FASB Accounting Standards Codification (ASC).

The accompanying consolidated financial statements have been prepared in accordance with accounting standards set by the Financial Accounting Standards Board (FASB).

The FASB sets generally accepted accounting principles (GAAP) that the Company follows to ensure its financial condition, results of operations, and cash flows are consistently

References to GAAP issued by the FASB in these notes to the financial statements are to the FASB Accounting Standards Codification (ASC).

Principles of Consolidation

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Emerging Growth Company

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (Jobs Act).

The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the Jobs Act).

Under the Jobs Act emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the Jobs Act until such time as those standards apply to private companies.

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The preparation of the Company’s consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, and related disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenue and expenses during the reporting period.

On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of accrued expenses, valuation of share-based awards, valuations of warrants, fair value of debt and income taxes.

On an ongoing basis, the Company’s management evaluates its estimates, which include but are not limited to management’s judgments of accrued expenses, valuation of stock-based option awards, valuations of warrants, and income taxes.

Actual results could differ from those estimates.

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Significant changes to the key assumptions used in the valuations could result in different fair values of common stock at each valuation date.

Comprehensive income (loss)

Components of comprehensive income or loss, including net income or loss, are reported in the consolidated financial statements in the period in which they are recognized.

Other comprehensive income or loss is defined as the change in equity during a period from transactions and other events and circumstances.

Net income (loss) and other comprehensive income (loss) are reported net of any related tax effect to arrive at comprehensive income (loss).

Comprehensive loss includes net loss as well as other changes in stockholders’

equity that result from transactions and economic events.

For the period presented, the Company had no elements of other comprehensive loss other than its net loss and unrealized gain on marketable securities.

Cash and Cash Equivalents

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Restricted Cash

The Company has $ 424 and $ 266 of restricted cash as of December 31, 2021 and 2020, respectively, which represents cash held in a restricted bank account u nder the terms of the Company’s Needham, Massachusetts facility lease and as security for the Company credit card.

The Company has $ 0.3 million and $ 0.4 million of restricted cash as of December 31, 2022 and 2021 , respectively, which represents cash held as a security deposit under the terms of the Company’s Needham, Massachusetts facility lease and at December 31, 2021, as security for the Company credit card.

Fair Value Measurements

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Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the

use of unobservable inputs.

Financial assets and liabilities carried at fair value are to be classified and disclosed in one of the following three levels of the fair value hierarchy, of which the first two are considered observable and the last is considered unobservable:

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Level 3—Unobservable inputs that are supported by little or no market activity that are significant to determining the fair value of the assets or liabilities, including pricing models, discounted cash flow methodologies and similar techniques.

The carrying values of cash and cash equivalents, accounts payable, accrued expenses and Paycheck protection plan loan approximate their fair values due to the short-term nature of these assets and liabilities.

The Company’s warrant liability is carried at fair value and is classified as Level 3 measurements (see Note 4).

The carrying value of the Company's long-term debt assumed from the Periphagen transaction is classified as Level 3 (See Note 3 and 4).

The carrying values of cash and cash equivalents (considered as Level 1 measurement), accounts payable, and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

The Company’s warrant liability is carried at fair value and is classified as Level 3 measurement.

Property and Equipment

Property and equipment consist of networking and computer equipment, furniture and fixtures and leasehold improvements.

Property and equipment are recorded at cost, and depreciated using the straight-line method over the es timated useful lives of the respective assets:

Property and equipment consist of laboratory and manufacturing equipment, networking and computer equipment, furniture and fixtures and leasehold improvements.

Property and equipment are recorded at cost, and depreciated using the straight-line method over the estimated useful lives of the respective assets:

ESTIMATED USEFUL LIFE

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Shorter of the useful life or remaining lease term

The Company accounts for leases in accordance with ASC 840.

Rent expense for leases is recognized on a straight-line basis beginning on the date premises were delivered.

Minimum lease payments comprise of only base rent.

The Company adopted ASC 842 as of January 1, 2022 and elected the transition method under ASU 2016-02 whereby the Company records a right-of-use asset and a lease liability on the balance sheet for all leases with terms longer than 12 months.

The Company also elected to apply the practical expedients intended to ease transition.

Accordingly, the Company has only applied ASC 842 to leases existing as of January 1, 2022.

The Company determines if an arrangement is, or contains, a lease at inception.

Lease right of use assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Lease right of use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments to be made over the lease term.

The lease right of use asset is equal to the lease liability and adjusted for prepaid rent, initial direct costs, and incentives.

As the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments.

The lease terms may include options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.

Operating lease expense is recognized on a straight-line basis over the lease term.

The Company has elected to not apply the recognition requirements of ASC 842 for short-term leases, which is defined as a lease that, at the lease commencement date, has a lease term of 12 months or less and does not include an option to purchase the underlying asset that the Company is reasonably certain to exercise.

For real estate lease agreements entered into or modified after the adoption of ASC 842 that include lease and non-lease components, the Company has elected to account for the lease and non-lease components, such as common area maintenance charges, as a single lease component term.

Concentrations of Credit Risk

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An impairment loss would be recognized when estimated undiscounted future cash flows expected to result from the use of an asset group are less than its carrying amount.

The impairment

loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows .

Long-lived assets consist of fixed assets.

In the fourth quarter of 2021, the Company recorded an impairment charge of approximately $ 553 related to manufacturing equipment that the Company has determined that it does not plan to use for its intended use and recorded a reserve to reduce the carrying value to its estimated realizable value.

The Company has not recorded any other impairment losses on such long-lived assets.

The impairment loss would be based on the excess of the carrying value of the impaired asset group over its fair value, determined based on discounted cash flows.

Long-lived assets consist of fixed assets and operating lease assets.

In the fourth quarter of 2021, the Company recorded an impairment charge of approximately $ 0.6 million related to manufacturing equipment that the Company does not plan to use for its intended use and recorded a reserve to reduce the carrying value to its estimated realizable value.

The Company has not recorded any additional impairment losses on such long-lived assets.

Revenue Recognition

The Company applies Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers, (ASC 606).

The Company applies Accounting Standards Codification (ASC), Topic 606, Revenue from Contracts with Customers, (ASC 606).

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

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The Company accounts for its stock-based compensation in accordance with ASC Topic 718, Compensation—Stock Compensation (ASC 718).

ASC 718 requires all share-based payments to employees and directors to be recognized as expense in the consolidated statements of operations and comprehensive loss based on their grant date fair values.

ASC 718 requires all share-based payments to employees and directors to be recognized as expense in the consolidated statements of operations based on their grant date fair values.

In addition, in accordance with FASB Accounting Standards Update (ASU) 2016-09 which identifies areas for simplification of several areas of share-based payment transactions, the Company treats non-employee grants the same as employee grants.

The Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

Company estimates the fair value of options granted using the Black-Scholes option pricing model for stock option grants to both employees and non-employees.

The Company believes the fair value of the stock options granted to non-employees is more reliably determinable than the fair value of the services provided.

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The Company uses the simplified method as prescribed by the SEC Staff Accounting Bulletin No.

107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a

reasonable basis upon which to estimate the expected term.

107, Share-Based Payment, to calculate the expected term for options granted to employees as it does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The expected term is applied to the stock option grant group as a whole, as the Company does not expect substantially different exercise or post-vesting termination behavior among its employee population.

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The expected dividend yield is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock.

There are significant judgments and estimates inherent in the determination of the fair value of the Company’s common stock prior to the IPO.

Prior to the IPO, there were significant judgments and estimates inherent in the determination of the fair value of the Company’s common stock.

These estimates and assumptions included a number of objective and subjective factors, including external market conditions, the prices at which the Company sold shares of preferred stock, the superior rights and preferences of securities senior to its common stock at the time of, and the likelihood of, achieving a liquidity event, such as an initial public offering or sale.

The Company expenses the fair value of its share-based compensation awards to employees and non-employees on a straight-line basis over the requisite service period, which is generally the vesting period.

The Company generally expenses the fair value of its share-based compensation awards to employees and non-employees on a straight-line basis over the requisite service period, which is generally the vesting period.

Government Grants

The Company has applied for grants for the reimbursement of expenditures with the National Institutes of Health for certain qualified operating expenditures.

The Company has applied for grants for the reimbursement of expenditures with the National Institutes of Health (NIH) and the Massachusetts Life Sciences Center for certain qualified operating expenditures, including employee-related costs.

The Company recognizes government grants when there is reasonable assurance that the Company will comply with the conditions attached to the grant arrangement and the grant will be received.

Government grants for research and development efforts are recorded as grant income and classified in other income in the statements of operations and comprehensive loss.

The Company recognized government grants of $ 1,076 and $ 624 for the years ended December 31, 2021 and 2020 , respectively, as a component of other income/(expense), net in the consolidated statements of operations and comprehensive loss.

Government grants for research and development efforts are recorded as grant income and classified in other income in the consolidated statements of operations.

The Company recognized government grants of $ 48,000 and $ 1.1 million for the years ended December 31, 2022 and 2021 , respectively.

Grant income is recognized as a component of other income/(expense), net in the consolidated statements of operations.

The Company's grant with the NIH was completed at the end of 2021.

The Company's grant with the Massachusetts Life Sciences Center began in 2022.

The Company accounts for income taxes using the asset and liability method in accordance with ASC Topic 740, Income Taxes (ASC 740) which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the financial statements or in the Company’s tax returns.

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First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities.

If the tax position is deemed more-likely-than-not to be sustained, the tax is then assessed as the amount of benefit to be recognized in the consolidated financial statements.

If the tax position is deemed more-likely-than-not to be sustained, the tax is then assessed as the amount of benefits to be recognized in the consolidated financial statements.

The amount of benefits that may be used are the largest amounts that have a greater than 50 % likelihood of being realized upon ultimate settlement.

The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

The provision for income taxes includes the effects of

any resulting tax reserves or unrecognized tax benefits that are considered appropriate as well as the related net interest received.

Net Loss Per Share

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Diluted net loss per share is computed using the weighted-average number of shares of common stock outstanding during the period and, if dilutive, the weighted-average number of potential shares of common stock.

In periods where the Company reports a net loss attributable to common stockholders, diluted net loss per share is the same as basic net loss per share, since dilutive shares of common stock are not assumed to have been issued if their effect is anti-dilutive.

Diluted net loss per share is the same as basic net loss per share for the years ended December 31, 2022 and 2021 since all potential shares of common stock instruments are anti-dilutive as a result of the loss for such periods.

The Company’s convertible preferred stock contractually entitled the holders of such shares to participate in dividends but did not contractually require the holders of such shares to participate in losses of the Company.

Accordingly, in periods in which the Company reported a net loss, such losses will not be allocated to such participating securities.

In periods where the Company reported a net loss attributable to common stockholders, diluted net loss per share is the same as basic net loss per share, since dilutive shares of common stock are not assumed to have been issued if their

effect is anti-dilutive.

The Company reported a net loss attributable to common stockholders for the years ended December 31, 2021 and 2020 .

Recently Adopted Accounting Standards

In December 2019, the FASB issued ASU 2019-12 , Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes, which is intended to simplify various aspects related to accounting for income taxes.

The standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2020 for public companies.

The standard was adopted by the Company on January 1, 2021 .

The Company’s adoption of ASU 2019-12 as of January 1, 2021 did no t have an impact on the Company’s financial statements and related disclosures.

Recently issued accounting standards

In February 2016, the FASB issued ASU 2016-02, Leases (“Topic 842”), which requires an entity to recognize assets and liabilities arising from a lease for both financing and operating leases.

The ASU will also require new qualitative and quantitative disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases.

ASU 2016-02 is effective for fiscal years beginning after December 15, 2021.

The Company has substantially completed its assessment of the impact ASU 2016-02 will have on its financial position, results of operations, and related footnotes.

The Company expects it will elect to utilize the available package of practical expedients permitted under the transition guidance within the new standard, which does not require the reassessment of the following:

i) whether existing or expired arrangements are or contain a lease, ii) the lease classification of existing or expired leases, and iii) whether previous initial direct costs would qualify for capitalization under the new lease standard.

Additionally, the Company expects it will make an accounting policy election to keep leases with an initial term of 12 months or less off of its balance sheet.

Based on the Company’s initial assessment, this standard will only require capitalization of the lease for its corporate headquarters at 117 Kendrick Street, Needham, Massachusetts.

Upon adoption of the standard, the Company expects to record a right of use asset and lease liability of approximately $ 1,300 an d $ 2,400 re spectively on its consolidated balance sheets.

The company expects the impact to its consolidated statements of operations and comprehensive loss to be immaterial.

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842) (ASU 2016-02), as amended by various subsequently issued ASUs.

The standard requires lessees to recognize an operating lease with a term greater than one year on their balance sheets as a right-of-use asset and corresponding lease liability, measured at the present value of the lease payments.

Lessees are required to classify leases as either finance or operating leases.

If the lease is effectively a financed purchase by the lessee, it is classified as a financing lease, otherwise it is classified as an operating lease.

This classification will determine the pattern of recognition of lease cost on our consolidated statement of operations over the term of the lease.

In July 2018, the FASB also issued ASU 2018-11, Leases (Topic 842):

Targeted Improvements (ASU 2018-11), which permits entities to continue applying legacy guidance in ASC 840, Leases, including its disclosure requirements, in the comparative periods presented in the year that the entity adopts the new leasing standard.

The Company elected the package of practical expedients permitted under the transition guidance within the standard.

Accordingly, the Company did not reassess the conclusion of whether the existing arrangements contain a lease, lease classification and initial direct costs under ASC 842.

In June 2020, the FASB also issued ASU 2020-05, Revenue from contracts with customers (Topic 606) and Leases (Topic 842):

effective dates for certain entities, which deferred the effective date certain entities were required to adopt ASC 842.

The update extended the effective date for adoption of ASC 842 until fiscal years beginning after December 15, 2021.

As an emerging growth company we were not required to adopt ASC 842 until January 1, 2022.

The Company adopted the standard on January 1, 2022 using the effective date method.

As such, the consolidated balance sheets and statements of operations for prior periods will not be comparable in the year of adoption of ASC 842.

As a result of the adoption of ASC 842, the Company recorded a lease right of use asset of $ 1.3 million and a lease liability of $ 2.4 million on the consolidated balance sheets as of January 1, 2022 related to an operating lease.

The Company derecognized deferred rent liabilities, which makes up the difference between the lease right of use asset and lease liability.

The adoption of the standard did not have a material impact on the Company’s consolidated statement of operations or consolidated statement of cash flows.

In August 2020, the FASB issued ASU 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40).

The guidance simplifies the complexity associated with applying U.S.

GAAP for certain financial instruments with characteristics of liabilities and equity.

This ASU (1) simplifies the accounting for convertible debt instruments and convertible preferred stock by removing guidance in ASC 470-20, Debt:

Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock;

(2) revises the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuers own stock and classified in stockholders' equity, by removing certain criteria required for equity classification;

and (3) revises the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share for convertible instruments by using the if-converted method.

As an emerging growth company, we are not required to adopt ASU 2020-06 until January 1, 2024, however early adoption is permitted.

The Company elected to early adopt the standard on January 1, 2022 and upon adoption, there was no impact to our consolidated statement of operations and cash flows and our basic and diluted net loss per share amounts.

In November 2021, the FASB issued ASU 2021-10, which created Topic 832, Government Assistance, which requires business entities to disclose information about certain government assistance they receive.

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The ASU is effective for fiscal years beginning after December 15, 2021 .

Based on the Company's initial assessment, the historical disclosure already meets the requirements of the new standard.

Upon adoption, the Company will finalize its assessment and update any applicable disclosure as necessary.

The Company believes its

historical disclosure already met the requirements of the new standard.

As such, no changes or additional disclosure was determined to be necessary .

Fair Value of Financial Assets and Liabilities

The following tables present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values:

FAIR VALUE MEASUREMENTS AS OF

DECEMBER 31, 2022 USING:

Long-term debt

Warrant liability

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DECEMBER 31, 2021 USING:

Long-term debt

Warrant liability

Valuation of long-term debt

The Company’s valuation technique used to measure the fair value of the long-term debt assumed as part of an asset acquisition (see Note 7) was a present value calculation based upon a credit rating estimated for the Company at the time the debt was assumed.

The determined credit rating used by the company was CCC based upon the financial position and stage of the Company.

The estimated rate was 15.83 % for an unsecured note due in November 2027 for a

CCC rated company.

The fair value of the long-term debt based on this approach plus the accrued interest represents a Level 3 measurement within the fair value hierarchy.

Valuation of Warrant Liability

In connection with the Series B Convertible Preferred Stock issuance, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, se e Note 9.

In connection with the November 13, 2018 issuance of Series B convertible preferred stock, the Company issued warrants to purchase shares of common stock of which certain warrants are shown as a liability on the balance sheet, see Note 10.

The fair value of the warrant liability was determined based on significant inputs not observable in the market, which represents a Level 3 measurement within the fair value hierarchy.

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The hybrid method is often used when a company is expecting a liquidity event in the near future and is a combination of the option-pricing and probability-weighted expected return methods.

Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock prior to the IPO, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying preferred stock, and the remaining contractual term of the warrants.

Estimates and assumptions impacting the fair value measurement include the fair value per share of the underlying shares of common stock, risk-free interest rate, expected dividend yield, expected volatility of the price of the underlying common stock, and the remaining contractual term of the warrants.

The most significant assumption in the model impacting the fair value of the common stock warrants is the fair value of the Company’s common stock as of each remeasurement date.

Prior to the IPO, the Company determined the fair value per share of the underlying common stock by taking into consideration the most recent sales of preferred stock, results obtained from third-party valuations and additional factors that are deemed relevant.

The following table provides a roll forward of the aggregate fair values of the Company’s liabilities, for which fair value is determined by Level 3 inputs:

PROMISSORY NOTE

Balance at January 1, 2020

The following table provides a roll forward of the aggregate fair values of the Company’s warrant liability, for which fair value is determined by Level 3 inputs (in thousands):

Balance at December 31, 2020

Change in fair value

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Fixed Assets, Net

Fixed assets, net consisted of the following:

Construction in progress

Fixed assets, net consisted of the following (in thousands):

Laboratory equipment

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Fixed assets, net

Depreciation and amortization expense related to the fixed assets was $ 232 and $ 91 for the years ended December 31, 2021 and 2020 , respectively.

Depreciation and amortization expense was $ 0.8 million and $ 0.2 million for the years ended December 31, 2022 and 2021 , respectively.

Accrued Expenses

Accrued expenses consisted of the following:

Accrued expenses consisted of the following (in thousands):

Payroll and employee related expenses

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Professional fees and other

Borrowings under Paycheck Protection Program

On March 27, 2020, President Trump signed the Coronavirus Aid, Relief and Economic Security (the CARES Act), which, among other things, outlines the provisions of the PPP.

Section 1106 of the CARES Act contains provisions for the forgiveness of all or a portion of a PPP loan, subject to the satisfaction of certain requirements.

The amount eligible for forgiveness is, subject to certain limitations, the sum of the Company’s payroll costs, rent and utilities paid by the Company during the 24-week period beginning on the funding date of the PPP loan.

On April 28, 2020, the Company, as obligor, entered into a promissory note evidencing an unsecured loan in the approximate amount of $ 460 under the PPP pursuant to the CARES Act.

The note matures two years after the date of the loan disbursement and bears interest at a fixed annual rate of 1.00 %, with the first six months of principal and interest deferred.

Under the terms of the CARES Act, as amended by the Flexibility Act, and the PPP, the Company can apply for and be granted forgiveness for all or a portion of the loan issued under the PPP and the loan is expected to be forgiven to the extent the proceeds are used in accordance with the PPP to cover payroll, mortgage interest, rent, and utility costs incurred by the Company over the 24-week period following the loan disbursement date.

In April 2021, the loan of $ 460 was forgiven and has been recorded as a component of grant income in the consolidated statements of operations and comprehensive loss.

Long-Term Debt

On February 24, 2022 , the Company entered into a four-year loan and security agreement (the Loan Agreement) with Silicon Valley Bank (SVB) pursuant to which SVB has agreed to provide term loans to the Company in an aggregate principal amount of up to $ 25.0 million.

The Company borrowed $ 20.0 million upon entering into the Loan Agreement.

The Company could have borrowed up to an additional aggregate principal amount not to exceed $ 5.0 million, at any time on or prior to December 31, 2022, upon the achievement of all of the following milestones, inclusively:

(a) positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high-grade glioma clinical trial;

and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $ 75.0 million from the issuance and sale of equity securities to investors acceptable to SVB.

The Company did not borrow any of the additional aggregate principal amount on or prior to December 31, 2022.

The term loan is secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75 % and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50 %.

The Company is required to make monthly interest payments, and commencing on February 1, 2024 , 24 consecutive installments of principal plus monthly payments of accrued interest.

The term loans mature on January 1, 2026 .

Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50 % of the original principal amount of any funded term loan being repaid.

The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB term loans, subject to a prepayment premium of 1 % to 3 % based upon the timing of the repayment.

During the year ended December 31, 2022 , the Company recorded interest expense relating to the Loan Agreement of $ 1.6 million .

The weighted average effective interest rate as of December 31, 2022 was 9.54 %.

The Company incurred $ 89,000 of debt issuance costs and will incur a $ 0.9 million final payment fee, which were recorded as debt discount and are being amortized over the term of the Loan Agreement.

The scheduled principal payments and net carrying amount of the term loan are as follows (in thousands):

YEAR ENDING DECEMBER 31,

Total principal

Final payment fee

debt discount

Accretion of debt discount

Net carrying amount

The carrying amount of the Company's term loan approximates fair value.

Other Long-term Debt

Periphagen Note

On December 9, 2019, the Company entered into a series of asset purchase agreements with Periphagen, Inc., a biopharmaceutical company focused on the development of gene therapy vectors.

Under the terms of the asset purchase agreements, the Company assumed a $ 1,000 promissory note bearing a contractual interest rate of 2 % compounded annually, with the outstanding balance and accrued interest due upon maturity in November 2027 , with no interim installments due.

Under the terms of the asset purchase agreements, the Company assumed a $ 1.0 million promissory note bearing a contractual interest rate of 2 % compounded annually, with the outstanding balance and accrued interest due upon maturity in November 2027 , with no interim installments due.

The estimated market rate for the Company for an unsecured loan with a maturity in November 2027 was determined to be 15.83 %.

Although the Company does not have a public credit rating, management estimates a CCC credit rating based on the Company’s financial position and stage of development.

Using the commensurate rate for a CCC rated company and based on the amount due at maturity, the present value of the future cash outflow was determined to be $ 417 at the transaction date.

As of December 31, 2021, the present value of future cash flows outflows is $ 560 .

Capital stock

Convertible preferred stock

As of December 31, 2020, the Company had authorized 17,187,676 shares of Preferred Stock (the Preferred Stock) and had designated 11,155,506 shares as Series B Convertible Preferred Stock (Series B Preferred) and 6,032,170 shares as Series C Convertible Preferred Stock (Series C Preferred).

Since the Preferred Stock was redeemable upon a liquidation event, which was not considered to be within the Company’s control, it has been classified in temporary equity on the accompanying consolidated balance sheets at December 31, 2020.

The carrying value of the Preferred Stock is the proceeds received less issuance costs.

Upon closing of the IPO, all outstanding shares of the Company’s convertible preferred stock automatically converted into 7,066,398 shares of common stock.

Issuances of Preferred Stock

On November 13, 2018, the Company entered into a Series B Preferred Stock Agreement whereby the Company was authorized to issue 11,155,506 shares of Series B Preferred, $ 0.01 par value, at a purchase price of $ 2.7696 per share.

The Company issued 9,026,618 shares of Series B Preferred for gross proceeds of $ 25,000 .

As further consideration, the purchaser of Series B Preferred received two warrants to purchase, in the aggregate, up to 7,344,982 shares of the common stock of the Company for $ 6.81 per share.

See Note 9 for description of the warrants issued in connection with the issuance of the Series B Preferred.

In addition, in November 2018, the Company issued 1,751,658 shares of Series B Preferred as payment of convertible notes and 377,130 shares of Series B Preferred as partial repayment of the outstanding related party notes payable.

On March 13, 2019, the Company entered into the Series C Preferred Stock Agreement whereby the Company issued 6,032,170 shares of Series C Preferred, $ 0.01 par value, at a purchase price of $ 3.73 per share for total gross proceeds of $ 22,500 .

The Preferred Stock had the following rights, preferences, privileges and restrictions:

The holders of Preferred Stock were entitled to vote together with all other holders of the Company’s voting stock on an “as converted”

basis on all matters submitted to a vote of the holders.

The Series B Preferred and Series C Preferred stockholders voted as separate classes on certain issues that solely affect their rights and privileges.

Each share of Preferred Stock was convertible into one share of common stock, subject to change per certain anti-dilution provisions in the Company’s charter and the reverse stock split discussed below.

All shares of Preferred Stock were subject to a mandatory conversion into common stock upon the closing of the sale of shares of common stock to the public of at least $ 25,000 in a firm commitment underwritten public offering pursuant an effective registration statement under the Securities Act of 1933 or upon a vote by or written consent of the requisite number stockholders.

Liquidation preference

Upon a voluntary or involuntary liquidation, dissolution or winding up of the Company, proceeds would have been distributed in the following order:

First, to the holders of the Series C Preferred in an amount for each such share of Series C Preferred equal to the greater of (i) two and one-half times the Series C Preferred original issuance price, plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Series C Preferred been converted into common stock immediately prior to such liquidation event.

If the Company has insufficient assets to permit payment of such amounts in full, the assets of the Company will be distributed to the holders of Series C Preferred pro rata in proportion to the amounts to which each such holder would otherwise be entitled.

Second, to the holders of the Series B Preferred in an amount for each such share of Series B Preferred equal to the greater of (i) the Series B Preferred original issuance price, plus any dividends declared but unpaid thereon or (ii) such amount per share as would have been payable had all shares of Series B Preferred been converted into common stock immediately prior to such liquidation event.

If the Company has insufficient assets to permit payment of such amounts in full, the assets of the Company will be distributed to the holders of Series B Preferred pro rata in proportion to the amounts to which each such holder would otherwise be entitled.

Third, upon the distribution of liquidation preference amounts in full to the holders of Preferred Stock, the remaining assets of the Company available for distribution to stockholders shall be distributed among the common stock pro rata based on the number of shares of common stock held by such holders.

The Preferred Stock was not subject to mandatory redemption except in the case of a merger or sale of the Company that has been approved by greater than 50% of the Series C Preferred and the Series B Preferred.

Using the commensurate rate for a CCC rated company and based on the amount due at maturity, the present value of the future cash outflow was determined to be $ 0.4 million at the transaction date.

As of December 31, 2022 , the carrying value of the note is $ 0.6 million.

On February 4, 2019, the Company signed a lease agreement for its new corporate headquarters at 117 Kendrick Street in Needham, Massachusetts.

The facility consists of a 15,197 square foot property which houses the corporate, clinical, laboratory and manufacturing operations for the Company.

The lease term ends on August 31, 2026 .

Prior to occupying the new space, the Company had construction performed to modify the space to meet its needs.

The Company received $ 0.8 million as a reimbursement by our landlord for a tenant improvement.

The $ 0.8 million lease incentive was recorded as reduction to the lease right of use asset recorded to the Company's consolidated balance sheet upon adoption of ASC 842 on January 1, 2022.

Disclosures under ASC 842

For the year ended December 31, 2022, the Company has recorded $ 0.4 million of operating lease cost and $ 0.1 million of variable lease cost.

The total lease expense for the year ended December 31, 2022 was $ 0.5 million .

Cash paid for amounts included in the lease liability for the year ended December 31, 2022 was $ 0.6 million .

Other Information

Operating cash flows used for operating leases (in thousands)

Weighted-average remaining lease term (years)

Weighted-average incremental borrowing rate

The future lease payments under non-cancelable leases at December 31, 2022, are as follows (in thousands):

Total future lease payments

imputed interest

Total lease liability

Disclosures under ASC 842

For the year ended December 31, 2021, the Company recorded rent expense of $ 0.5 million.

The following table summarizes the future minimum lease payments due under the Company's facility lease as of December 31, 2021, presented in accordance with ASC 840, the relevant accounting standard at that time (in thousands):

Total minimum lease payments

Common Stock and Preferred Stock

Preferred Stock

The Company has authorized 10,000,000 shares of $ 0.01 par value preferred stock at December 31, 2021.

The Company has authorized 150,000,000 shares of $ 0.01 par value common stock at December 31, 2021 and had authorized 75,000,000 shares of $ 0.01 par value common stock at December 31, 2020 of which 28,689,842 and 11,635,094 are issued and outstanding as of December 31, 2021 and 2020, respectively.

Common shares are voting and dividends may be paid when, as and if declared by the board of directors, subject to the limitations and preferences of the Preferred Stock.

The Company has authorized 10,000,000 shares of $ 0.01 par value preferred stock at December 31, 2022 and 2021.

The Company has authorized 150,000,000 shares of $ 0.01 par value common stock at December 31, 2022 and 2021 of which 29,042,418 and 28,689,842 were issued as of December 31, 2022 and 2021, respectively.

The Company had 28,919,810 and 28,689,842 outstanding shares as of December 31, 2022 and 2021, respectively.

Common shares are voting and dividends may be paid when, as and if declared by the board of directors.

Common Stock Reserved

The Company has reserved the following shares of common stock for future issuance as of:

Series B Preferred conversion

Series C Preferred conversion

Stock options outstanding

Unvested restricted stock

Shares available for future grant under stock option plan

Reverse Stock Split

On July 14, 2021, the Company’s board of directors and stockholders approved a one-for-2.4579 reverse stock split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock which became effective on July 15, 2021.

In connection with the Company's IPO, on July 14, 2021, the Company’s board of directors and stockholders approved a one-for-2.4579 reverse stock split of the Company’s issued and outstanding common stock and a proportional adjustment to the existing conversion ratios for the outstanding shares of convertible preferred stock which became effective on July 15, 2021.

Accordingly, all share and per share amounts for all periods presented in the accompanying consolidated financial statements and notes thereto have been retroactively adjusted, where applicable, to reflect the reverse stock split.

Initial Public Offering

The Company completed the IPO, including the partial exercise of the underwriters’

option to purchase additional shares, at which time the Company issued 9,887,994 shares of its common stock at a price to the public of $ 8.00 per share, resulting in net proceeds to the Company of $ 71,335 , after deducting underwriting discounts and commissions and offering expenses.

The Company completed its IPO on July 29, 2021 and issued 9,000,000 shares of its common stock at a price to the public of $ 8.00 per share.

On August 13, 2021, the Company issued an additional 887,994 shares of its common stock

at $ 8.00 per share pursuant to a partial exercise of the underwriters' purchase option.

Total net proceeds to the Company from the issuance of the 9,877,994 shares of common stock were $ 71.3 million , after deducting underwriting discounts and commissions and offering expenses.

Upon closing of the IPO, all outstanding shares of the Company’s Preferred Stock automatically converted into 7,066,398 shares of common stock.

The Company has the following warrants outstanding for the purchase of common stock as of December 31, 2021:

Shelf Registration and At-the-Market Offerings

offerings under the Shelf (the ATM Program).

The Shelf was declared effective by the SEC on August 12, 2022.

As of the date hereof, no sales have been made pursuant to the ATM Program.

The Company has the following warrants outstanding for the purchase of common stock as of December 31, 2022 and 2021:

STOCK SUBJECT

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November 2025

Series B Conditional Warrants

Conditional Series B Warrants

November 2025

NC Ohio Trust

Series A Warrants

Series A Warrants were issued in connection with the Series A Preferred Stock in 2016.

In 2018, upon the conversion of the Series A Preferred Stock into common stock, the Series A Warrants became exercisable for common stock at an exercise price of $ 5.67 per share.

Subsequent to the IPO, 75,946 Series A Warrants were exercised and the remaining 48,850 Series A Warrants expired in August 2021 .

Series B Warrants

In connection with the November 13, 2018 issuance of Series B Preferred, the Company issued warrants to purchase 3,672,484 shares of common stock for $ 6.81 per share to the purchaser of the Series B preferred (the “Series B Warrants”) which are exercisable upon issuance.

In addition, the Company issued to the same stockholder additional five-year warrants for the purchase of 3,672,484 shares of common for $ 6.81 per share which are only exercisable in the event that the Company completes a future financing that meets certain financial milestones or achieves certain share prices (the “Conditional Series B Warrants”).

The Series B Warrants and the Conditional Series B Warrants contain provisions allowing cashless exercise.

The Company recorded the Series B Warrants as a component of stockholder’s equity at the time of issuance at their estimated fair value of $ 2,124 and recorded the Conditional Series B Warrants as a liability on the consolidated balance sheet as the number of shares used to calculate the settlement is not a fixed number of shares.

The Conditional Series B Warrants are remeasured to their fair value at each reporting date with changes in the fair value recognized as a component of other income (expense), net in the consolidated statements of operations and comprehensive loss.

The Company will continue to recognize changes in the fair value of the conditional warrant liability until each Conditional Series B Warrant is exercised, expires or qualifies for equity classification.

The Conditional Series B Warrant liability fair value was $ 18,252 and $ 6,831 as of December 31, 2021 and 2020, respectively.

On June 24, 2021, the Company’s board of directors approved and on July 14, 2021 the stockholders approved, effective upon the closing of the IPO, an amendment to the terms of the Series B Warrant and the Conditional Series B Warrants to extend the expiration date from November 2023 to November 2025 .

In addition, the terms of the Conditional Series B Warrants were amended such that in the event the future financing milestones or certain share prices are achieved, the warrants would only be exercisable in conjunction with the sale of the Company or in November 2025 through a cashless exercise.

In connection with the November 13, 2018 issuance of Series B convertible preferred stock (the Series B Preferred), the Company issued to the purchaser of the Series B Preferred warrants to purchase 3,672,484 shares of common stock for $ 6.81 per share (the Series B Warrants), which became fully exercisable upon issuance.

The Series B Warrants contain provisions allowing cashless exercise.

In addition, the Company issued to the same stockholder additional five-year warrants for the purchase of 3,672,484 shares of common stock for $ 6.81 per share (the Conditional Series B Warrants), which become exercisable in the event that the Company completes a future financing that meets certain financial milestones or achieves certain share prices as follows:

918,121 shares vest upon (1) a financing event effected through the sale of our equity securities to third parties resulting in at least $ 20,000,000 in gross proceeds with a per share price of $ 12.47 , or (2) an average market price (determined over a consecutive 10 -day period) of $ 12.47 per share;

an additional 918,121 shares vest upon (1) a financing event with a price per share of $ 13.20 , or (2) an average market price (determined over a consecutive 10 -day period) of, $ 13.20 per share;

an additional 918,121 shares vest upon (1) a financing event with a per share price of $ 13.94 , or (2) an average market price (determined over a consecutive 10 -day period) of, $ 13.94 per share;

an additional 918,121 shares vest upon (1) a financing event with a per share price of $ 14.68 , or (2) an average market price (determined over a consecutive 10 -day period) of, $ 14.68 per share.

On June 24, 2021, the Company’s board of directors approved and on July 14, 2021 the stockholders approved, effective upon the closing of the IPO, an amendment to the terms of the Series B Warrants and the Conditional Series B Warrants to extend the expiration date from November 2023 to November 2025 .

In addition, the exercise period for the Conditional Series B Warrants was amended such that in the event the future financing milestones or certain share price targets described above are achieved, the Conditional Series B Warrants can only be exercised in conjunction

with the sale of the Company, on a cash or cashless exercise basis, or otherwise in November 2025 through a cashless exercise.

The Company recorded the Series B Warrants as a component of stockholder’s equity at the time of issuance at their estimated fair value of $ 2.1 million and recorded the Conditional Series B Warrants as a liability on the consolidated balance sheet as the number of shares used to calculate the settlement is not a fixed number of shares.

The Company will continue to recognize changes in the fair value of the Conditional Series B Warrants until each Conditional Series B Warrant is exercised, expires or qualifies for equity classification.

The warrant liability fair value was $ 1.9 million and $ 18.3 million as of December 31, 2022 and 2021, respectively.

NC Ohio Trust Warrants

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The warrant provides the beneficiary the right to purchase 162,740 shares of the Company’s common stock, $ 0.01 par value at an exercise price of $ 1.46 per share, subject to adjustments as specified in the warrant agreement.

The arrangement is unknown to the beneficiary as the arrangement is a silent trust.

The Company recognizes the warrants as compensation expense within the consolidated statement of operations and comprehensive loss when the warrants are granted or at the service inception date if the service inception date precedes the grant date.

The Company recognizes the warrants as compensation expense within the consolidated statement of operations when the warrants are granted or at the service inception date if the service inception date precedes the grant date.

In the period in which the grant date occurs, cumulative compensation cost shall be adjusted to reflect the cumulative effect of measuring compensation cost based on the fair value at the grant date rather than the fair value previously used at the service inception date or subsequent reporting dates.

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The Company remeasures the fair value of the award at each reporting date, as the service date preceded the grant date.

The value of the warrants for 162,740 shares of common stock was $ 1,070 and $ 695 as of December 31, 2021 and 2020 , respectively, and was recorded as stock compensation expense within research and development expense and a credit to stockholders’

The value of the warrants for 162,740 shares of common stock was $ 0.2 million and $ 1.1 million as of December 31, 2022 and 2021 , respectively, and changes in the fair values were recorded as stock compensation expense within research and development expense and a credit to stockholders’

equity in the consolidated financial statements.

Stock options, restricted stock and stock—based compensation

Stock Options, Restricted Stock and Stock-Based Compensation

Equity Incentive Plans

The Company’s 2015 Stock Plan, as amended, (the 2015 Plan) provides for the Company to sell or issue common shares or restricted common stock, or to grant incentive stock options or nonqualified stock options for the purchase of common stock, to employees, members of the board of directors and consultants of the Company.

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Options granted under the 2015 Plan expire no more than ten years from the date of grant.

As of December 31, 2021 , there will be no additional grants under the 2015 Plan and the 2015 Plan continues to govern the terms and conditions of the outstanding awards under the 2015 Plan.

On July 14, 2021, the Company’s 2021 Equity Incentive Plan, or the 2021 Plan, was approved by the Company’s stockholders, and became effective upon completion of the IPO and serves as the successor to the 2015 Plan.

There are 2,054,000 shares of common stock reserved for issuance under the 2021 Plan and 1,878,997 shares remained available for grant as of December 31, 2021.

As of December 31, 2022 , there are no shares available for grants under the 2015 Plan and the 2015 Plan continues to govern the terms and conditions of the outstanding awards under the 2015 Plan.

On July 14, 2021, the Company’s 2021 Equity Incentive Plan (the 2021 Plan) was approved by the Company’s stockholders, and became effective upon completion of the IPO and serves as the successor to the 2015 Plan.

3,201,594 shares of common stock are reserved under the 2021 Plan, of which 1,311,915 shares remain available for future grants as of December 31, 2022.

Stock Options

Stock option activity is summarized as follows:

TERM (IN YEARS)

Outstanding as of January 1, 2020

Cancelled or forfeited

Outstanding as of December 31, 2021

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Unvested as of December 31, 2022

The 2015 Plan permits participants to use common stock they previously acquired to pay for the exercise of stock options based upon the fair value on the date of exercise.

In connection with the exercise of a stock options to purchase 306,518 shares of our common stock at an exercise price of $ 1.46 , option holders tendered 122,608 shares of our common stock previously acquired in consideration of the full aggregate exercise price in accordance with the terms of the option and the 2015 Plan.

The shares tendered are recorded as treasury stock within the Company's consolidated financial statements at December 31, 2022.

The fair value of stock options granted was estimated on the grant date using the Black-Scholes option pricing model based on the following weighted-average assumptions:

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$ 4.97 - $ 11.23

The total intrinsic value of stock options vested during the years ended December 31, 2021 and 2020 was $ 6,648 and $ 12 , respectively.

Stock-based compensation expense for the years ended December 31, 2021 and 2020 was classified in the consolidated statements of operations and comprehensive loss as follows:

The total intrinsic value of stock options vested during the years ended December 31, 2022 and 2021 was zero and $ 6.6 million, respectively.

Restricted Stock

Under the terms of the restricted stock unit agreements covering the common stock, shares of common stock related to restricted stock units are subject to time-based and performance-based vesting.

The restricted stock units will immediately be forfeited to the Company if the relationship between the recipient and the Company ceases.

Restricted stock activity is summarized as follows:

AVERAGE GRANT

DATE FAIR VALUE

Unvested at December 31, 2021

Unvested at December 31, 2022

The aggregate fair value of restricted stock units that vested during each of the years ended December 31, 2022 and 2021 was zero .

Stock-Based Compensation

Stock-based compensation expense for the years ended December 31, 2022 and 2021 was classified in the consolidated statements of operations as follows (in thousands):

YEAR ENDED DECEMBER 31,

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Total stock based compensation expense

As of December 31, 2021 and 2020, total unrecognized compensation cost related to the unvested stock-based awards was $ 6,298 and $ 4,778 , respectively.

These amounts are expected to be recognized over a weighted average period of 2.26 and 3.05 years, respectively.

Income tax expense for 2021 and 2020 consists of the following:

Current expense (benefit):

Total current expense (benefit):

Deferred expense (benefit):

Total deferred expense (benefit):

Total income tax expense (benefit):

As of December 31, 2022 and 2021, total unrecognized compensation cost related to the unvested stock-based awards was $ 7.6 million and $ 6.3 million, respectively.

As of December 31, 2022 and 2021, these amounts are expected to be recognized over a weighted average period of 2.42 and 2.26 years, respectively.

Due to the Company's net losses for 2022 and 2021, as well as the full valuation allowance on its net deferred tax assets as discussed below, the Company did no t record any income tax expense or benefit for the years ended December 31, 2022 and 2021.

A reconciliation of income tax expense at the federal statutory income tax rate to the income tax expense at the Company’s effective income tax rate is as follows:

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Valuation allowance

Net deferred tax assets as of December 31, 2021 and 2020 consist of the following:

Net deferred tax assets as of December 31, 2022 and 2021 consist of the following (in thousands):

Deferred tax assets:

Net operating losses

Accrued expenses & other

Accrued expenses and other

Deferred revenue

Lease liability

Stock Compensation

Capitalized R&D expenditures

Total deferred tax assets

Valuation allowance

Net deferred tax assets (liability)

As of December 31, 2021 , the Company has gross federal and state net operating loss carryforwards of approximately $ 8,815 and $ 48,363 which begin to expire in 2027 and 2032 , respectively.

Additionally, the Company has $ 42,780 of the federal net operating loss carryforwards that can be carried forward indefinitely.

As of December 31, 2021, the Company has gross federal and state tax credit carryforwards of approximate ly $ 1,950 and $ 1,139 , respectively, which begin to expire in 2036 and 2028 , respectively.

Deferred tax assets

Deferred tax liabilities:

Right of use asset

Total deferred tax liabilities

Net deferred tax assets (liabilities)

As of December 31, 2022 , the Company has gross federal and state net operating loss carryforwards of approximately $ 65.9 million and $ 61.9 million which begin to expire in 2027 and 2032 , respectively.

Additionally, the Company has $ 57.1 million of the federal net operating loss carryforwards that can be carried forward indefinitely.

As of December 31, 2022 , the Company has gross federal and state tax credit carryforwards of approximately $ 3.4 million and $ 1.8 million, respectively, which begin to expire in 2036 and 2028 , respectively.

Management of the Company has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, which are comprised principally of net operating loss carryforwards and certain tax credits.

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The Company will make such a determination prior to the utilization of any future net operating losses.

A summary of changes in the valuation allowance for deferred tax assets during the year ended December 31, 2021 and 2020 were a s follows:

A summary of changes in the valuation allowance for deferred tax assets during the year ended December 31, 2022 and 2021 were as follows (in thousands):

Valuation allowance

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Exclusive Licensing Agreement with a Related Party

In March 2014, the Company entered into an exclusive licensing agreement with Ventagen, LLC (“Ventagen”) which provides Ventagen the right to develop products for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia, and Bolivia.

Ventagen paid the Company $ 1,000 upon the signing of the agreement and agreed to a fixed future payment to the Company of $ 2,500 .

The future payment will be made upon the achievement of $ 5,000 of sales of an approved product by Ventagen and is subject to reduction if Ventagen’s costs to develop an approved product exceeds $ 4,000 .

In March 2014, the Company entered into an exclusive licensing agreement with Ventagen, LLC (Ventagen) which provides Ventagen the right to develop products for commercial sale and distribution within Mexico, Belize, Guatemala, Honduras, El Salvador, Costa Rica, Nicaragua, Panama, Colombia, and Bolivia (the Territory).

Ventagen paid the Company $ 1.0 million upon the signing of the agreement and agreed to a fixed future payment to the Company of $ 2.5 million.

The future payment will be made upon the achievement of $ 5.0 million of sales of an approved product by Ventagen and is subject to reduction if Ventagen’s costs to develop an approved product exceeds $ 4.0 million.

In addition to the upfront payment and the future payment, Ventagen agreed to purchase from the Company all manufactured product that is required for clinical or commercial purposes at a price of cost plus 25 % of the wholesale price of the approved product subject to a minimum or maximum price.

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The Company also agreed to provide certain services to Ventagen related to Ventagen’s development plan.

Stockholders of the Company own 49.5 % of the voting stock of Ventagen, including 47 % by the Company’s founders who are currently senior executives and significant stockholders of the Company, and trusts for the benefit of their children.

The Company is recognizing the $ 1,000 upfront license fee as research and development service revenue, related party, as the Company’s license agreement with Ventagen is within the scope of ASC 606.

Stockholders of the Company own 49.5 % of the voting stock of Ventagen, including 47 % by the Company’s founders who are currently significant stockholders of the Company, and trusts for the benefit of their children.

The Company is recognizing the $ 1.0 million upfront license fee as research and development service revenue, related party, as the Company’s license agreement with Ventagen is within the scope of ASC 606.

The license agreement met the contract existence criteria and contained distinct, identifiable performance obligations for which the stand-alone selling prices were readily determinable and allocable.

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however, the Company assigned no value to the license transfer.

The remaining $ 1,000 transaction price was allocated between the research and development oversight and clinical data sharing.

The remaining $ 1.0 million transaction price was allocated between the research and development oversight and clinical data sharing.

The Company is recognizing revenue for these obligations over an 8-year period, beginning in 2015, by measuring the progress towards satisfaction of the performance obligations.

As clinical oversight and clinical data sharing occurs over the 8 —year clinical trial period, the revenue is recognized over the same period in which the cost for these services is incurred.

The Company defers recognition of the portion of the $ 1,000 non-refundable upfront license fee for the portion of the performance obligations that are not satisfied.

The Company recognized revenue of $ 125 in the years ended December 31, 2021 and 2020 .

The license agreement includes a $ 2,500 potential future milestone payment due to the Company upon successful completion of certain separate, distinct events.

At this time, the Company cannot estimate when the milestone-related performance obligations are expected to be achieved and will recognize revenue once

satisfaction is probable.

There was no additional variable consideration, significant financing components, noncash consideration, or consideration payable to the customer in this agreement.

As clinical oversight and clinical

data sharing occurs over the 8 —year clinical trial period, the revenue is recognized over the same period in which the cost for these services is incurred.

The Company defers recognition of the portion of the $ 1.0 million non-refundable upfront license fee for the portion of the performance obligations that are not satisfied.

The Company recognized revenue of $ 0.1 million in the years ended December 31, 2022 and 2021 .

The license agreement includes a $ 2.5 million potential future milestone payment due to the Company upon successful completion of certain separate, distinct events.

At this time, the Company cannot estimate when the milestone-related performance obligations are expected to be achieved and will recognize revenue once satisfaction is probable.

There was no additional variable consideration, significant financing components, non-cash consideration, or consideration payable to the customer in this agreement.

Technology License Agreement

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Pursuant to the Option Agreement, the Company has obtained the exclusive right from MGB to negotiate an exclusive license to make, develop and commercialize rQNestin, a genetically modified oncolytic herpes simplex virus for the treatment of certain types of cancers.

Pursuant to the Option Agreement, the Company will support a clinical trial to be conducted at MGB pursuant to the terms of a clinical trial agreement to be negotiated and the Company has committed to remitting $ 750 in support of such clinical trial over the course of approximately three years .

Pursuant to the Option Agreement, the Company will support a clinical trial to be conducted at MGB pursuant to the terms of a clinical trial agreement to be negotiated and the Company has committed to remitting $ 0.8 million in support of such clinical trial over the course of approximately three years .

Upon execution of the Option Agreement, the Company remitted a non-refundable fee of $ 40,000 to MGB to be applied toward the Company’s on-going obligations to reimburse patent expenses.

In the years ended December 31, 2021 and 2020 , respectively, the Company expensed $ 28 and $ 269 , respectively, for startup and patient fees for clinical trials performed by MGB.

On September 15, 2020, the Company exercised the Option Agreement with MGB and entered into an exclusive worldwide patent license agreement with MGB (“the MGB License”).

In connection with the MGB License, the Company paid a fee of $ 100 and agreed to reimburse patent costs incurred by MGB, including $ 141 paid at the time of entering into the MGB License.

In the years ended December 31, 2022 and 2021 , respectively, the Company expensed zero and $ 28,000 , respectively, for startup and patient fees for clinical trials performed by MGB.

On September 15, 2020, the Company exercised the Option Agreement with MGB and entered into an exclusive worldwide patent license agreement with MGB (the MGB License).

In connection with the MGB License, the Company paid a fee of $ 0.1 million and agreed to reimburse patent costs incurred by MGB, including $ 0.1 million paid at the time of entering into the MGB License.

Prior to the first commercial sale, the Company is required to pay MGB an annual license fee of $ 50,000 beginning following the fourth anniversary of the effective date.

The MGB License contains cumulative milestone payments equaling a maximum amount of $ 39,000 upon the achievement of various clinical, commercial and sales milestones of both primary and secondary products.

The MGB License contains cumulative milestone payments equaling a maximum amount of $ 39.0 million upon the achievement of various clinical, commercial and sales milestones of both primary and secondary products.

Following the first commercial sale, the Company is required to pay royalties to MGB, which are paid at an increasing rate as net sales increase, ranging from low single digits to high single digits.

In addition, after the first commercial sale, the Company is required to pay MGB a pre-determined fixed annual minimum royalty, which amount may be credited against earned royalties starting in the fourth year following the first commercial sale.

The Company is also agreed to pay a single digit royalty rate on net sales of any derived products.

The Company also agreed to pay a single digit royalty rate on net sales of any derived products.

Commitments and Contingencies

Related party leases

In January 2008, the Company entered into an operating lease agreement with a term through December 31, 2022 with Ellka Holdings, LLC (“Ellka”) for the space in which the Company operated in Auburndale, MA.

This lease was terminated and a termination payment of $ 115 was made to Ellka and included in operating expenses for the year ended December 31, 2020.

In May 2016, the Company entered into a second lease agreement with Ellka for living space for employees, also in Auburndale, MA which was also was terminated at the end of 2020.

Ellka is owned and operated by the company’s founders, who were senior executives and are significant stockholders of the Company, and members of their immediate family.

Facility lease

On February 4, 2019, the Company signed a lease agreement for its new corporate headquarters at 117 Kendrick Street in Needham, Massachusetts.

The facility consists of a 15,197 square foot property which houses the corporate, clinical and manufacturing operations for the Company.

The lease term ends on August 31, 2026 .

Prior to occupying the new space, the Company had construction performed to modify the space to meet its needs.

The cost of this construction was $ 765 and was paid for by the landlord provided allowance in the lease agreement.

The $ 765 lease incentive was recorded as deferred rent and is being amortized over the life of the lease.

Total rent expense under these leases was $ 459 and $ 619 for the years ended December 31, 2021 and 2020, respectively.

The future minimum lease payments at December 31, 2021, are as follows:

Total minimum lease payments

The Company has identified the guarantees described below as disclosable, in accordance with ASC 460, Guarantees.

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The aggregate maximum potential future liability of the Company under such indemnification provisions is uncertain.

The Company leases office space under a seven –

year noncancelable operating lease expiring in 2026 .

The Company leases office space under a noncancelable operating lease expiring in 2026 .

The Company has standard indemnification arrangements under this lease that require it to indemnify the landlord against all costs, expenses, fines, suits, claims, demands, liabilities, and actions directly resulting from any breach, violation, or nonperformance of any covenant or condition of the lease.

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Legal Proceedings

The Company is not a party to any litigation and does not have contingency reserves established for any litigation liabilities.

From time to time, we may become involved in litigation or other legal proceedings.

On December 15, 2022, Periphagen notified us by letter of its claim that we have failed to use commercially reasonable efforts to complete a human proof of concept clinical trial of an NT-3 Asset under an Exclusive License Agreement dated December 9, 2019 between us and Periphagen (the “Periphagen License Agreement”).

We have denied Periphagen’s claims.

On January 13, 2023, we filed a demand for arbitration against Periphagen with the American Arbitration Association, seeking a declaration that Periphagen’s December 15 letter failed to comply with the dispute and escalation provisions in the Periphagen License Agreement.

After filing the demand, the parties began engaging in the dispute and escalation process under the Periphagen License Agreement.

On March 10, 2023, Periphagen filed its answer and counterclaims to our demand for arbitration.

In its counterclaims, Periphagen seeks a declaration that we have not used commercially reasonable efforts to complete a human proof of concept clinical trial of the NT-3 Asset and a declaration that any further extension of time would not be scientifically or commercially reasonable.

Periphagen also seeks a declaration that Candel must use commercially reasonable efforts to develop the NT-3 Asset during any remaining time under the agreement.

We have denied Periphagen’s counterclaims.

In the event the parties are unable to resolve the dispute as part of the escalation process, an arbitrator will decide whether we have used commercially reasonable efforts.

In the event that the arbitrator determines that we have not used commercially reasonable efforts, then we may submit a specified payment in lieu of satisfying such obligations.

Aside from the proceeding with Periphagen, we are not currently a party to any litigation or legal proceedings that, in the opinion of our management, are probable to have a material adverse effect on our business.

Regardless of outcome, litigation can have an adverse impact on our business, financial condition, results of operations and prospects because of defense and settlement costs, diversion of management resources and other factors.

Net Loss Per Share

Basic and diluted net loss per share attributable to common stockholders was calculated as follows:

Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):

YEAR ENDED DECEMBER 31,

Net loss attributable to common stockholders

Weighted-average shares of common stock outstanding-basic and diluted

Net loss per share attributed to common stockholders-basic and diluted

Net loss per share -basic and diluted

The Company’s potentially dilutive securities have been excluded from the computation of dilutive net loss per share as the effect would be to reduce the net loss per share.

Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share attributable to common stockholders is the same.

The Company excluded the following potential shares of common stock from the computation of diluted net loss per share attributable to common stockholders because including them would have had an anti-dilutive effect.

Therefore, the weighted-average number of shares of common stock outstanding used to calculate both basic and diluted net loss per share is the same.

The Company excluded the following potential shares of common stock from the computation of diluted net loss per share because including them would have had an anti-dilutive effect.

YEAR ENDED DECEMBER 31,

Series B Preferred (as converted to common stock)

Series C Preferred (as converted to common stock)

Outstanding warrants for common stock

Outstanding stock options (as converted to common stock)

Sub sequent events

On February 24, 2022 , the Company entered into a loan and security agreement (the “Loan Agreement”) with a bank pursuant to which the bank has agreed to provide term loans to the Company in an aggregate principal amount of up to $ 25.0 million.

The Company borrowed $ 20.0 million upon entering into the Loan Agreement.

The Company can borrow up to an additional aggregate principal amount not to exceed $ 5.0 million, at any time on or prior to December 31, 2022, following the Company having provided evidence to the bank of (a) achievement of positive Phase 2 clinical activity data from the Company’s CAN-2409 NSCLC clinical trial, (b) dosing of its first patient in its Phase 3 CAN-2409 high

grade glioma clinical trial and (c) receipt on or prior to December 31, 2022, of net cash proceeds in an amount equal to at least $ 75.0 million from the issuance and sale of equity securities to investors acceptable to SVB.

The term loans are secured by substantially all of the Company’s properties, rights and assets, except for its intellectual property, which is subject to a negative pledge under the Loan Agreement.

The term loans bear interest at a floating rate per annum equal to the greater of (A) 5.75 % and (B) the prime rate (as published in the money rates section of The Wall Street Journal) plus 2.50 %.

The Company is required to make monthly interest payments, and commencing on February 1, 2024 , 24 consecutive installments of principal plus monthly payments of accrued interest.

Upon repayment in full of the term loans, the Company will be required to pay a final payment fee equal to 4.50 % of the original principal amount of any funded term loan being repaid.

The Loan Agreement permits voluntary prepayment of all, but not less than all, of the SVB Term Loans, subject to a prepayment premium of 1 % to 3 % based upon the timing of the prepayment.

Unvested restricted stock

Candel Therapeutics, Inc.

March 30, 2023

/s/ Paul Peter Tak

Paul Peter Tak, M.D., Ph.D., FMedSci

President and Chief Executive Officer

/s/ Paul Peter Tak

President and Chief Executive Officer

(Principal Executive Officer)

March 30, 2023

Paul Peter Tak, M.D., Ph.D.

Chief Financial Officer (Principal Financial and Accounting Officer)

March 30, 2023

/s/ Paul B Manning

March 30, 2023

Paul B Manning

/s/ Edward J.

March 30, 2023

Benz, Jr, M.D.

/s/ Chris Martell

March 30, 2023

Chris Martell

/s/ Renee Gaeta

March 30, 2023

/s/ Gary Nabel

March 30, 2023

Gary Nabel, Ph.D., M.D.

/s/ Estuardo Aguilar-Cordova

March 30, 2023

Estuardo Aguilar-Cordova, M.D.

/s/ Joseph Papa

March 30, 2023

/s/ Diem Nguyen

March 30, 2023

Diem Nguyen, Ph.D., MBA

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 9A. Controls and Procedures